A bankruptcy cripples you on several fronts. Not only does it cripple your financial position, it also cripples your confidence. But post-bankruptcy, you must pick up the pieces of your life and move on. Unfortunately it is easier said than done, to move out of the mental abyss that one recedes into after a bankruptcy. What a person needs is a well-planned approach to life after bankruptcy.
The Need to Improve Credit
The reasons to improve credit score quickly is two-fold. Firstly, a bankruptcy hammers your credit score which reduces your chances of availing credit in the future. Hence, unless you bring your credit score up to an acceptable level, the chances of you getting the credit you need to rebuild your life are quite low. Secondly, it is well-known that people with a better credit rating can get a loan at a lower interest rate. Hence when you improve your rating, not only do you become eligible for a loan again, but you can get it at a lower interest rate as well.
Ways to Improve Credit
It may be pertinent to understand what are the factors that determine your FICO credit score and what is their individual weightage. Here are the factors which determine your credit score.
- Payment History - 35%
- Amounts Owed - 30%
- Length of Credit History - 15%
- New Credit -10%
- Types of Credit Used - 10%
Pay Off Debts
Simple and straightforward. Pay off all the money you owe to banks, credit card companies and other assorted lenders. The faster you reduce your debts, the faster your credit score will increase. After all, a lot hinges on your accounts payable. 30% to be precise.
Avail Credit
Paying off debts is alright, but where will the money come from? You could avail some bad credit loans or request a credit card company to give you a credit card. Systematically availing and paying off credit will help improve your credit score. Since your credit score also takes into account the types of credit you use, this approach may benefit you. Also ensure that you pay the mortgages/bills regularly.
Strategically Reduce Debt
It is very important to plan out a debt strategy. How? Get a short term loan or a loan with a negotiable rate of interest. This way, if you keep paying off your bills, your credit score will improve and you will be applicable for credit at a lower rate of interest. You can use your credit financing to reduce your debt by paying it off. You could also use a credit card instead of a loan.
Do Not Shut Zero Balance Accounts
If there are credit accounts or credit cards whose balance you've successfully paid off, do not shut them. It is always good to display the clean laundry. This step has a three-fold benefit. First, it looks like you have been paying off your debts. Second, it displays your competency in paying off more types of credit. Thirdly, it shows a longer credit history.
Build Assets not Liabilities
This may not be explicitly mentioned anywhere, but it is just good sense. By increasing your assets you increase your dependability. If you have good enough assets, you will be able to mortgage them to avail credit. Hence your lenders will give you credit as they get a good collateral in return for their risk. Build liabilities like credit card bills and you'll watch your credit rating reach a new abyss.
Keep In Touch With Lenders
This one's for a rainy day. Always be truthful and be in the good 'books' of your lenders. Suppose for some reason, you are unable to pay off your debt. If you give the lenders an opportunity to kiss-and-tell, they will. Hence always keep in touch with your lenders and express your inability to pay and see if you can make an arrangement within yourself in some way. After all, the lender wants his money and not your credit score to plummet, so I'm sure you two can work something out within yourselves.
Keep an Eye on Credit Reports
There are chances that there may be some error in the credit report. So if you feel so, contact the credit rating agency immediately and get your credit score reevaluated.
Bankruptcy is an experience that no man would want to go through. But with a good-enough plan and guidance, you will be able to weather the storm.
0 komentar:
Posting Komentar