If you've been through bankruptcy recently, it's pretty likely your credit scores have suffered a bit. If your plan is to buy a home or refinance in the future, it's important to begin working on rebuilding your credit right away so your scores recover sooner. Though much of the damage to your credit will "heal" on its own as time passes, it's still important to do what you can to help things along. The faster your credit recovers, the easier it will be to qualify for a great mortgage down the road.
The following are a few straightforward ideas for rebuilding your credit more quickly after a bankruptcy:
1) Check your credit regularly and fix any problems right away. You're entitled by federal law to obtain a copy of your report once per year from AnnualCreditReport.com, but it's a good idea to check it more often than that. If you find errors, contact the appropriate reporting agency and get it cleared up as soon as possible. Contact information for all three major reporting agencies can usually be found in the report or online.
2) Clear up any open derogatory tradelines. Even if your debt was wiped out in it's entirety by the bankruptcy, it's common for old accounts to report as collections or charge offs long after the bankruptcy was discharged. These won't necessarily clear up on their own, so you may need to deal with them yourself. If you do owe on a collection account, it's possible you can negotiate the payoff balance with the collection agency, but be sure to get any agreement in writing before you write a check.
3) Get all payments in on time without fail. This might seem like an obvious tip, but it's worth a mention because it's very important. Lenders will want to see that you've reestablished your credit with a good payment history, and if you've missed even a single payment, it could make it tough to qualify for a mortgage.
4) Keep credit card balances below 30% of the limit. If you have a major ding on your credit like a bankruptcy, it's important to make sure everything else is as good as it can be to counterbalance the damage of the bankruptcy. High balances on your cards can damage your scores because it makes you look "maxed out", which is a significant risk factor for the reporting agencies and lenders. Keep your balances below 30% of the limits at all times, even if you pay your balance in full.
5) Don't close older accounts. The reporting agencies like to see long credit histories, so if you happen to have an old account you don't use a whole lot still open, don't be quick to close it. Closing old accounts can shorten your credit history and damage your scores.
6) Apply for a secured credit card. If you've recently gone through bankruptcy, most lenders probably won't be interested in lending to you for a while. One way you can help reestablish a good payment history is by getting a secured credit card. You simply deposit some cash into the bank and the lender secures the card with the deposit. After you've reestablished a good payment history, you may be able to convert the account to a regular credit card.
Hopefully these tips help! Again, time is the main "healer" of damage after a bankruptcy, but there's still some things you can do help your credit recover faster. The sooner your credit recovers, the easier it will be to qualify for a great mortgage deal down the line.
The following are a few straightforward ideas for rebuilding your credit more quickly after a bankruptcy:
1) Check your credit regularly and fix any problems right away. You're entitled by federal law to obtain a copy of your report once per year from AnnualCreditReport.com, but it's a good idea to check it more often than that. If you find errors, contact the appropriate reporting agency and get it cleared up as soon as possible. Contact information for all three major reporting agencies can usually be found in the report or online.
2) Clear up any open derogatory tradelines. Even if your debt was wiped out in it's entirety by the bankruptcy, it's common for old accounts to report as collections or charge offs long after the bankruptcy was discharged. These won't necessarily clear up on their own, so you may need to deal with them yourself. If you do owe on a collection account, it's possible you can negotiate the payoff balance with the collection agency, but be sure to get any agreement in writing before you write a check.
3) Get all payments in on time without fail. This might seem like an obvious tip, but it's worth a mention because it's very important. Lenders will want to see that you've reestablished your credit with a good payment history, and if you've missed even a single payment, it could make it tough to qualify for a mortgage.
4) Keep credit card balances below 30% of the limit. If you have a major ding on your credit like a bankruptcy, it's important to make sure everything else is as good as it can be to counterbalance the damage of the bankruptcy. High balances on your cards can damage your scores because it makes you look "maxed out", which is a significant risk factor for the reporting agencies and lenders. Keep your balances below 30% of the limits at all times, even if you pay your balance in full.
5) Don't close older accounts. The reporting agencies like to see long credit histories, so if you happen to have an old account you don't use a whole lot still open, don't be quick to close it. Closing old accounts can shorten your credit history and damage your scores.
6) Apply for a secured credit card. If you've recently gone through bankruptcy, most lenders probably won't be interested in lending to you for a while. One way you can help reestablish a good payment history is by getting a secured credit card. You simply deposit some cash into the bank and the lender secures the card with the deposit. After you've reestablished a good payment history, you may be able to convert the account to a regular credit card.
Hopefully these tips help! Again, time is the main "healer" of damage after a bankruptcy, but there's still some things you can do help your credit recover faster. The sooner your credit recovers, the easier it will be to qualify for a great mortgage deal down the line.
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Can I purchase a home after a bankruptcy? Find out when you can qualify for a mortgage after a bankruptcy.
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