After you have filed bankruptcy, you have the chance to start over again with your credit history. You may have taken a credit counseling training as part of your bankruptcy which can help you make smart choices with your credit. But, it is always good to have some straightforward tips to help guide you through the process of building your credit back up. Here are three recommendations to help you in this process.
Establish New Credit
As soon as your bankruptcy has been discharged and finalized, you can begin to build a new credit history. Your credit report will show you filed bankruptcy on your old creditors, so when you apply for credit, credit companies will look at your credit report and know you are fresh out of bankruptcy.
This is a nice time to apply for credit because creditors know you don't have any debt yet, so you are more likely to pay them back easily. However, creditors realize you have had financial struggles in the past that may have been caused by poor financial decisions. For this reason, credit card companies may charge you a higher interest rate and possibly an annual fee. Start with one or two of these credit cards, then as your credit gets better over time, you can apply for lower rate cards with no annual fees.
It is a good idea to apply for two to three new credit accounts with different companies to begin building credit. It helps to build your credit when you have different types of credit, such as a vehicle loan, a retail store card, a bank credit card, and a mortgage. This shows credit companies you can handle different types of credit.
Keep Your Credit Card Balances Low
When you get one or two credit cards to begin building your credit back up, use the accounts and make payments on them to build your credit history. But, the amount of your balance you are carrying on an account compared to your credit limit can hurt your credit score. If your balance is nearing the amount of your credit limit, your credit score will go down. You want to use credit counselling and aim at keeping your balance owed to twenty-five percent of your credit limit or less.
Use your credit cards without getting into trouble with a high balance by only using the card for a few simple purchases each month. Then, pay the balance off in full when you get your statement. This will report on your credit report that you are using the card, but you aren't racking up the balance. For example, use your credit card just for gasoline you have to buy anyway. Then, set aside the money you would have spent on the gasoline and send it in to your credit card company when you get your monthly bill.
Make Your Payments On Time
The payment history on your credit accounts makes up thirty-five percent of your credit score. By sending your credit account monthly payments in late each month, you are going to hurt your credit score a great deal.
If you are going through a tough financial time, make sure to pay at least the minimum payments on your credit until you can catch up, otherwise your credit score is going to suffer. And, once your credit report shows you have made some late payments, they can stay on there for up to seven years.
When you have been given the chance to build your credit with a clean start after bankruptcy, you don't want to make simple mistakes that can haunt you for years. Use these three tips to help you build back your credit.Share