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It doesn’t take much for a financial shortcoming to bring you down. For millions of Americans, a health crisis, a lost job, or an unforeseen loss can be the difference between making ends meet and insurmountable debt. If this sounds familiar, you’re not alone; in the U.S., over one million individuals file for bankruptcy each year. With these tips, you can improve your credit score after bankruptcy and take steps toward a healthy financial lifestyle.
Pay Your Bills On Time
Outstanding debt isn’t doing you any favors. To demonstrate responsibility and reliability, paying your bills on time is one of the most important steps you can take.
Whether you have outstanding debts, like student loans that bankruptcy didn’t discharge, or regular obligations, like utility and phone bills, be sure to pay each bill on time, every month. If you have minimum payments, do your best to exceed them. These steps will show creditors and reporting agencies that you are trustworthy with money and pose no risk to future lenders. If you struggle to stick to a schedule, set up automatic bill pay whenever possible to ensure prompt payments.
It may sound counterintuitive, especially if unsustainable credit use got you into hot water in the first place, but using credit responsibly is the best way to prove your worthiness. It may be a slow process, but even small steps will be worth it in the long run.
If you still have a credit card, use it at least a few times a month on small purchases. If you do not, apply for a secured credit card. These cards are designed for those hoping to build credit, and are secured by a refundable cash deposit to ensure proper use. Limits tend to be low, often $100 to $300, but this is an asset; with a low limit, there’s no way to overspend. Be sure to pay your monthly bill on time and in full.
Monitor Your Score
How can you know if your credit is getting better without keeping an eye on your progress?
Most Americans know little about the factors that go into a credit score, but you shouldn’t be one of them. When you take the time to learn some of the basic tenets regarding how scores are calculated and what actions can drive your score up or down, you’ll know what’s working and what isn’t. Additionally, consistent monitoring can be motivating, especially if you have a goal in mind. If you’re trying to bring up your score to secure an affordable mortgage or buy a new car, seeing results of your hard work can keep you focused and on the right track.
Bankruptcy isn’t easy, but the effects to your credit won’t last forever. With time and effort, it’s possible to bring your credit score up, bit by bit. By adopting responsible habits, paying bills on time, and using credit consistently but minimally, you can do what it takes to improve your credit score after bankruptcy.