Increasing Your Credit Score after Personal Bankruptcy in Boston, Massachusetts
A client called us the other day and reported that now that he was 18 months post bankruptcy, his FICO credit score was 640, he was getting better and better rates on his credit cards, and that he was “overjoyed” at how “easy this was” once he was given the relief that the “fresh start” the law promises. Apparently he has been following the simple rules that improve credit scores.
We have written about this on prior occasions and we are pleased that the information is helping clients. The following is adapted from our website about reestablishing credit after bankruptcy.
1. Live within your means. Your payments on consumer debt should equal no more than 20% of your expendable income after costs for housing and a vehicle.
2. Pay your reaffirmed, pre-bankruptcy debts on time; 35% of your score is based on payment history.
3. Pay your utility bills and rent on time; these folks report to credit agencies. 30% of your score is based on amount and type of outstanding debt.
4. Open a checking or savings account. Lenders may look at this to determine if you can responsibly handle money. Use a debit card and then apply for a credit card from that bank. 15% of your credit score is based on length of credit history.
5. Apply for store and gas credit cards where you would normally pay cash. Use but pay timely. Don’t do this too many times as 10% of your credit score is based on the numer of new accounts.
6. Apply for a secured card where you deposit cash and charge against it. Pay advances back over two months so that they will be reflected as positive marks on your credit report.
7. Find a friend or relative to cosign for you on a loan and pay it on time.
8. Look for car dealers and mortgage brokers that attest to be “bankruptcy friendly.”
9. Stay away from payday loans that are at high interest rates and are a “bad credit” trap. 10% of your credit score is based on the mix of types of credit.
10. Write a letter to each credit reporting agency explaining any unusual circumstances that lead to you filing.