A credit score is the credit history that an individual has built up over the years. Credit scores are important when applying for a loan. To check an individual’s ability to pay back a loan, have agencies thoroughly examine the applicant’s credit report. If the credit scores are reasonable, that individual will be able to get a loan. In the case of bankruptcy, it is possible to build your credit score back up, but it requires work.
Understanding bankruptcy
Filing bankruptcy legally protects a person from repaying back some of his or her debt. The debtor can protect many of his or her assets, although there are limits to how much of one’s assets may be protected.
Insights about FICO score – These days a credit score could be termed as a synonym for a FICO score. FICO is named after the company who invented the concept of credit scores. These scores vary from a score of 300 to 850. Any score above 700 is considered as good. The higher the score the more likely credit shall be extended.
It may take someone just a few years to recover post bankruptcy. The following are the 5 effective tips that can aid in improving anybody’s credit scores after bankruptcy!
1. Do a credit report review! – Whenever a person gets into a difficult situation, reviewing past mistakes can help avoid future stumbles. In the same manner, thoroughly reviewing one’s credit reports would considerably help a person to manage his or her credit scores.
2. Get hold of some secured credit cards! – Secured credit cards are those where an individual pays a bank or credit union some amount of money in exchange a certain amount of credit is extended. From that deposited amount, the bank provides that individual with some credit. It is beneficial only if the bank or credit union reports the card to all the major credit bureaus. Maintaining a good record with the secured credit cards can effectively help reestablish the credit scores of an individual.
3. Unsecured Cards at rescue! – If you do not have enough capital to get a secured card, you can opt for an unsecured card, where you would not have to pay any money to get the card. After filing for bankruptcy, an individual may open up unsecured cards with small credit limits. Paying off these cards on time can be crucial to rebuilding credit.
4. Make payments on time! – The most effective way to better your credit score is to pay all of your bills before the due date. Keep virtual reminders of due dates to help you stay on track. The history of the payment is said to make up about 35% of your credit score.
5. Go apply for a loan! – After filing for bankruptcy, you can indeed apply for a loan. However, you need to apply for a loan that you will be able to repay. Do not take unnecessary risks, but carefully review any potential loans and choose only what you are confident you will be able to make payments on. If the payments are made on time after taking the loan, your credit scores will automatically get better with time.