First-Aid For Your Credit Score – Bankruptcy
Is your credit score not where you want it to be? Are you tired of having your credit score embarrassing low because of your debt? One of the best things about bankruptcy is the fresh start that bankruptcy gives to rebuilding your credit score. Before we go into deal on why bankruptcy helps your credit, let us learn about how credit scores are given.
How is my credit score calculated?
Your credit score is calculated from many different pieces of credit data and history. Your credit score considers both the positive and negative information from your credit data and history. Even though late payments will lower your credit score, making a habit of making your credit payments on time will raise your score. Also remember that each credit agency calculates your credit score differently. Your credit score is based on 5 different categories. In general these five categories are:
- Payment History
- Amounts Owed
- Length of Credit
- New Credit
- Types of Credit Used
Even though your credit score is based on these five categories, for some people the importance of these categories may vary. For some people who have not had credit that long, some categories are factored differently than those with a longer credit history. The importance of any one factor on your credit score calculation depends on all of the information found in your credit report. For some people, one factor may have a larger impact than it would for another person. That is why it is impossible to measure the exact impact of any single factor of your credit score without looking at your whole credit report. Your payment history refers to whether or not you have paid your past credit accounts on time; the amounts owed refers to just the dollar amount you owe on each accounts; length of credit history, refers to how long your accounts have been established and how long has it been since you used certain accounts; types of credit in use, refers to the mix of credit cards and loans that are active, and new credit, refers to the rate of opening of new accounts.
What Can I Do?
Well there is a lot you can do. With less debt, it is easier to keep your remaining debt in check. It also makes it less likely you will fall behind. However, you credit scores will not improve as long as all of your old, negative information is still listed with the credit reporting agencies. After all, all three major credit reporting agencies collected information about you before including balances due, late payments, charge-offs, and judgment lawsuits. After a bankruptcy discharge, all your debts should be listed on your credit report as “included in BK” with a $0.00 balance. If they are not listed that way, they will appear to still be active accounts up for collection, which could hinder your ability to get credit. Sadly, not all creditors update their information after a bankruptcy discharge. It is your duty to expedite it.
There are many things you can do to help the process along. A couple of month after your bankruptcy discharge, you should order a copy of your credit report to make sure all your discharged debts are listed as being included in your bankruptcy case and show a $0.00 balance on it. You can contact each of the three major credit reporting agencies individually at the following numbers:
- Trans Union: 1.800.888.4213
- Equifax: 1.888.397.3742
- Experian: 1.800.997.2493
Or you can grab a copy of your credit report from all three agencies from:
Here are some other tips to help you along the way to rebuilding your credit rating after a bankruptcy.
Apply For Credit
The best way to rebuild your credit after a bankruptcy is to start an account that will report positive information to you. Get a one credit card with a small credit limit, and use it very sparingly and pay the entire balance every month before the due date. This way the company will report your positive payment history to the three credit reporting agencies.
Read and Understand all the Fine Print
After your bankruptcy discharge, you are going to get several offers from credit card companies and loan companies. Be wary of what you get yourself into before accepting these offers. Make sure you understand the interest rates, fees, and expected payments before you open any new credit accounts.
Prove You Received Your Bankruptcy Discharge
Even after your debts have been discharged through bankruptcy, you may need proof to send to your creditors that you do not owe them. You attorney can provide you with a copy of all the papers filed in your bankruptcy case, so keep these paper with your other important papers and documents, and don’t give away your only copy. You can use these documents to prove that you filed bankruptcy, which debts were listed in your bankruptcy, and that you successfully received your bankruptcy discharge.
Pay Your Bills On Time
Did you know that most utilities companies along with your credit card companies report late payments to the credit reporting agencies? After you file for bankruptcy, if you keep making late payments, potential creditors are going to continue to see you as a credit risk. Remember to avoid late fees and reports of late payment by paying your accounts in full before the due date.
If you want to see what the power of the bankruptcy law can do for your credit score, don’t hesitate to call us! To schedule your FREE CONSULTATION with one of our experienced bankruptcy attorney, give us a call now at 214.748.4848 or e-mail us at Questions@BLJLaw.com today.
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