Re-Building A Credit Score In 5 Simple Steps

06-Aug-2011 Filing for chapter 7 or chapter 13 bankruptcy in Chicago or foreclosing on your home can do some damage to your credit score. Even without a major blemish like this on your credit report there are a lot of benefits to having a high FICO (credit) score.

When you go to get a mortgage or take out a car loan your approval weighs heavily on your credit score. Even if you are approved for the loan your FICO score will help determine what interest rate you can qualify for and that can make a significant difference in your monthly payment. The higher the score the easier it will be to get a loan and the lower your interest rate will be.  

1. Reopen credit cards that you haven't been using.
If you have a credit card account that you have stopped using re-open it. You are already approved for these cards so a credit check will not be necessary. The credit limit on the cards adds to your total available credit and will lower your debt-to-credit ratio. A lot of credit card debt will have less of an impact on your score if the debt accounts for a small amount of your available credit. According to the article in Yahoo Finance this makes up 30% of your FICO score.

2. Take out a loan to pay off credit cards.
Credit card debt is unsecured so it makes creditors nervous. Car loans are an example of secured debt for which the vehicle acts as collateral. Taking out a personal loan to pay off a credit card with a high interest rate will improve your credit score because a personal loan is a more favorable type of debt. The loan type makes up 10% of your score.

3. Don't fill out any applications that ask for your social security number.
This is straightforward. The more your credit is run the lower your FICO score will be. It's beneficial to be approved for some credit however it is not wise to apply for every store credit card that is offered to you. If you let too many people pull your credit it will have a negative effect on your score. The frequency at which your credit is pulled makes up 10% of your credit score.

4. Make payments on time - always!
According to the article in Yahoo! Finance your payment history makes up a whopping 35% of your credit score. Make sure all debts are current and continue to pay bills on time. This is the easiest way to improve your score.

5. Maintain good credit history for a long time
When you are late on a payment or become delinquent on a loan it may go on your credit report. If you get a negative item on your credit report, it can take as long as 7 years before that item is removed. If you can avoid this type of credit history blemish and make timely payments you will improve your score. Payment history makes up 15% of your total score.

Your Chicago bankruptcy lawyers will tell you that following these simple tips will go a long way to improving your credit score. Start today!

Chang and Carlin
The content found on the Chang & Carlin site is not legal advice and is purely for informational purposes. The information contained herein is not a substitute for the advice of an attorney and does not create an attorney-client relationship. If you are interested in obtaining information about chapter 7 bankruptcy, chapter 13 bankruptcy, foreclosure services, real estate legal services, you are encouraged to call our law firm at 866-790-8601 or Request a Free Legal Evaluation. Chang and Carlin serves clients in Chicago, Schaumburg, Joliet, Warrenville, Waukegan, Illinois.