Anyone emerging from bankruptcy wonders “can your credit score improve?” And if so, what can you do to make it happen fast?
Here’s what you need to know.
Repairing your credit, especially after bankruptcy, can feel like an uphill battle. There’s no doubt it’s a process. However, having specific actions to take that gradually boost your score makes that process easier.
What can you do to increase your credit score?
1. Pay Your Bills on Time
Perhaps the most important thing you can do once you emerge from bankruptcy is to pay your bills on time. Late payments are the biggest threat your credit score faces. Creditors view your payment histories when determining whether or not to lend you money.
If just a single late payment shows up on your credit report after a bankruptcy, lenders will assume you’ve slipped back into bad habits. Even if you filed for bankruptcy due to reasons beyond your control, late payments make you look like a huge financial risk.
If there’s only one thing you do to increase your credit score, make sure it’s to pay your bills on time.
2. Keep Your Balances Low
In addition to paying what you owe each month on time, make sure the balances on your credit accounts remain low. The more “available credit” you have the better when it comes to your credit score. Available credit is the credit you’ve been extended by lenders that you have not used.
For example, if you have a Mastercard with a $5000 limit and your balance is $500, you have $4500 in available credit. The lower your balance the more available credit you have.
3. Check Your Credit Report
In addition to all of the reasons to review your credit report because of errors with closed accounts and incorrect balances, it’s also important to make sure your credit limits are correct.
Again, this is because the amount of available credit you have is so important. Your credit score is calculated using both the amount of debt you have and your available credit. If your credit limits are reported inaccurately, it could make it appear that you have less available credit than you actually do.
If a credit card company increases your limit, make sure that increase is reflected on your credit report. Also, check existing cards to make sure your limits are reported accurately. There’s no need to ask your creditors to increase your limits, just make sure the limits you have are correctly reported.
4. Open New Accounts, But Do So Responsibly
For some people, after bankruptcy, there’s a temptation to never open another credit card account again after your experience with bankruptcy. This is a mistake. To improve your credit score, you’ll need to prove that you are capable of handling credit responsibly. This means opening new credit accounts.
But this isn’t to say you should go crazy opening new accounts when credit card offers begin rolling in after bankruptcy. Initially, opening a new account lowers your score a bit. A lot of inquiries harm your credit.
Your best bet is to open just one credit card initially and use it to help you rebuild your credit. From there you can determine if additional credit cards are needed or if having just one card is enough to get your credit score where you’d like it to be.
5. Remove Negative Information from Your Credit Report
Make sure your credit report is correct and that anything incorrect is removed from your report. This is a process, but it is one well worth investing time in. The last thing you need after emerging from bankruptcy is to have something incorrectly damaging your credit score.
Can Your Credit Score Improve?
Yes, but you need to be patient and willing to work at improving it. Emerging successfully from bankruptcy and understanding the next steps is essential if you want to see improvement as quickly as possible.
For more information or to find out whether bankruptcy is right for you, contact R. Flay Cabiness, II, P.C. at (912) 554-3774 (Brunswick, GA); (912) 375-5620 (Hazlehurst, GA) or; (912) 554-3756 (Jesup, GA) to schedule a consultation.
