How to improve credit score?
Credit Scores are analyzed before lending money, creditors want to determine how much of a risk you are—in other words, how likely you are to repay the money they loan you. Credit scores help them do that, and the higher your score, the less risk they feel you’ll be.
In order to improve your credit scores, it’s important to know where you stand currently. The three-digit numbers, which range from 300 to 850, are the key to your borrowing costs.
- Evaluate credit report: get hold of copies of your credit report–including your credit score–from all three major credit reporting agencies in the undeviating impact of your bankruptcy discharge. Reviewing your credit reports and noting your credit score from each of these agencies gives you a starting point for observing changes following your bankruptcy. The three major U.S. credit reporting agencies are Experian, Equifax and TransUnion.
- Pay down your credit cards: Paying off your installment loans (mortgage, auto, student, etc.) can help your credit scores, but not as significantly as paying down — or paying off — revolving accounts such as credit cards. Lenders like to see a big gap between the amount of credit you’re using and your existing credit limits. Getting your balances below 30% of the credit limit on each card can really help. While most debt counselors recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits.
- Credit repair plans to Avoid: responsibility is the most important building blocks of a strong credit profile. There really aren’t any shortcuts. Some credit repair companies charge high fees for things you can do yourself, or encourage illegal activities, like providing false information when applying for credit. Beware of credit repair schemes and don’t jeopardize your fresh start after bankruptcy.
- Do not to carry balances: You don’t want to build up debt again, and the higher the entitlement of balances to your total available credit boundary, the more negative the impact will be on your credit score. Some credit card issuers will let you to open accounts soon after you’ve completed your bankruptcy case. They know you’ve confronted your financial problems, and you won’t be able to seek bankruptcy aid in the near future. After your bankruptcy case is over, you’ll have to wait six to eight years before filing another Chapter 7 bankruptcy case. For Chapter 13 bankruptcy, it’s a two to four-year wait. It goes without saying that if you’ve filed for Chapter 13 bankruptcy, fulfilling the terms of your repayment plan is a must.
- Don’t close unused credit card accounts near loan time: If you have quite a few credit card accounts but are only using a few of them, you’ll only raise your balance-to-limit ratio if you close the unused ones. You also shouldn’t open new accounts when applying for a loan if possible. If you have a short credit history or very few accounts, opening a new credit line may lower your score since you don’t have an established track record. What’s more, a new account will lower the average age of your accounts, another factor in your score.
It’s important to note that raising your FICO credit score is a bit like losing weight: It takes time and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time.
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