Bankruptcy Fix Up

How To Raise Your Credit Score

May 7th, 2008 Subscribe To Our Feed

If you are recovering from bankruptcy or have had serious debt problems in the past, you will probably have a low credit score. As most people know, this score is often used as an indication of your financial management skills. To this extent, financial institutions base many of their decisions on this score. So if you apply for a loan or a credit card, your score will influence the decision. If your score is particularly low, the institution may decline your application for credit. If it is in the middle then the interest rate you may get will be higher than someone with a higher score. The credit score may also be used by landlords to determine if you are a suitable tenant or potential employers, especially in finance related jobs, to determine if you are a suitable candidate. Thus, it is important to raise your credit score. This article will cover how to raise your credit score.

The first piece of advice is to check your credit history. Your credit score is derived from the information that is contained on your credit history. In some cases this history may be wrong, out of date or may indicate that you are a victim of some kind of identity theft. Your first job is to check that all the information contained on the report is legitimate and correct.

You can receive a free credit report from each of the three credit agencies (Experian, Equifax and TransUnion). Typically, you want to look for obvious errors, like a false account or an account that you have no knowledge of. This could be opened by an identity thief. Then look for more subtle mistakes, like accounting errors. Things like incorrect personal details and charges that are not yours. You also want to check that certain negative information in your past has been taken off the record. For instance, most negative information can only be retained for 7 years and 6 months. Bankruptcy settlements can only stay on the report for 10 years.

Once you have established that your credit history is correct, you have to work on improving your financial management skills. This will turn around your history and increase your credit score.

Work on building up your savings. Try to get a regular savings plan going, no matter how small the amount may be. The fact that you can stick to the plan is a good habit to get into and will build long term wealth.

Minimize your use of credit cards. Whilst it is advisable to have one or two credit cards rather than none at all, you should not use the cards excessively. You should try to keep well within the credit limit for each card and pay off the balance each month. You should look to pay all bills on time every month.

The main idea is to show financial management over a period of time. This time period could be as short as six months, depending on how you go and the types of bills and credit you are dealing with. It may take longer however, but the important thing is to create a set of habits that will hold you in good stead for the long term future. Indeed there is no instant fix on how to raise your credit score, simply good financial management over an extended period of time.