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All About Your Credit Score

You’ve always been taught that your credit score is an important number. That, in fact, is true. A higher credit score means you’ll get better interest rates on loans and credit cards. Your credit can also affect your insurance premiums as well as job prospects. Since it has such a big impact on your life, you would do well to educate yourself regarding this important number.

Tips To Increase Your Score

Your credit score is something that takes time to build. You don’t just wake up one day and magically end up with a credit score of 800. You have to work to get good credit and it can take years. You can also set yourself back if you have late or missed payments, judgments, bankruptcies or you’ve utilized a large portion of your available credit. The national average FICO score hit an all-time high in April 2016 at 699. If you’re near this number, then you’re on the right track. You probably won’t receive any offers of credit if your score is below 600. Any offers you do get will come with exorbitant interest rates. You want your score to be 700 or higher. Follow these tips to get there:

  • Check your credit report for errors and dispute any incorrect information.
  • Make all payments on time.
  • If you’re unable to pay a bill, for instance, a doctor’s bill, call and make payment arrangements. If you fail to do this, the bill could be sent to collections.
  • Use a low-interest credit card to pay a recurring fee and pay the balance off every month.
  • Keep credit card balances low and never exceed credit utilization of 30%.

How Bankruptcy Affects Your Score

When you file for bankruptcy, you are essentially walking away from the debt that has overwhelmed you. People file bankruptcy for various reasons and often it is the only option when someone has been unable to work or has been hit with unexpected medical expenses. Bankruptcy doesn’t always mean financial irresponsibility. But it does mean that your credit score is going to be affected. Here’s what you can expect in regards to your credit when you file for bankruptcy:

  • Expect your score to hit rock bottom. If you had a good credit score before, you can expect it to drop by about 200 points.
  • A bankruptcy will stay on your credit report for 10 years. Therefore, bankruptcy causes long-term damage to your credit that will take time to repair.
  • The negative implications of the bankruptcy will cease over time. While anyone looking at your credit report will see the bankruptcy for the next 10 years, your score may begin to improve shortly after the bankruptcy. You no longer owe the debts that were discharged so this can benefit your credit utilization rate which has a moderate impact on your score.

If you want to achieve a higher credit score after bankruptcy, then you should do the following:

  • Check your credit report to ensure accuracy
  • Ensure the bankruptcy was reported correctly
  • Obtain a secured credit card and use it sparingly
  • Take out an auto loan
  • Open a couple lines of credit

Denied Even With Excellent Credit

Maybe you have perfect credit but were still denied credit. Many factors go into the decision to extend credit to you and the decision isn’t based solely on your score. There could be a few reasons for being denied.

  • Your debt to income ratio is too high.
  • You have a short credit history.
  • You have filed for bankruptcy in the past.

As you can see your credit score is a reflection of your creditworthiness. Therefore, you should be diligent in maintaining the highest score possible so you receive the best opportunities.

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