Bankruptcy: What you Can and Cannot Fix
We all know that your credit score is important–the real question is, how good of a score do you need? If you are looking to purchase anything significant like a car, house, or furniture; or if you’re attempting to obtain a loan or credit card, a good score is required. While building credit can take some time, creating bad credit surprisingly can happen quickly. With the current economy, a majority of Americans are living paycheck to paycheck. When you find yourself in this lifestyle, losing a job, getting in a car wreck or having an unexpected emergency can set you into an uncontrollable whirlwind of damaged credit and collection calls.
If you currently have a low credit score, time will certainly help you build your finance portfolio, as well as a few other good practices. At Skrupa Law we’re here to tell you what you need to know about managing debt and/or filing for bankruptcy.
1. Know What Your Credit Score Looks Like
There are a few free credit score sites out there, but if you want to know the real shape of your credit, contact one of the three credit bureaus: Equifax, Experian, or TransUnion. You can request one free credit score report per year or for free if you were recently denied credit. It is important to check your credit report at least every 6 months to see whether all your information is correct.
2. Make Your Payments on Time
When you are working on rebuilding your credit, it is important not to miss payment dates. If this is a problem you’ve had in the past, it’s time to correct it. By making payments diligently and on time, you’re proving to the credit bureaus that you’ve corrected the bad habits that lowered your score in the first place.
3. Be Wary of Interest Rates
If you do have high interest rates, you can either transfer those balances to accounts with lower rates or simply try to pay as much as you can as fast as you can. Paying off an account with a prohibitively high interest rate takes longer because your payments go toward interest first, not the principal balance, so you should make more than the minimum payment.
4. Pay Your Outstanding Debts
Pay off smaller debts with the highest interest rates first, and focus on one debt at a time. Things are easier to manage this way, and seeing those first debts get knocked off the list early in the debt repayment process can keep you motivated to continue. When you get the balance paid off, stop using the card until all of your credit cards are paid off. If you cannot resist using the card, you can close the card. However, we recommend that you do not close the card because it will hurt your credit score to close the account. Taking debts off your credit score by paying them off will cause your score to rise, but keep the account open if possible.
At Skrupa Law, we realize that when you are in debt you’re under a lot of stress. Receiving collection calls during your day can lead to anxiety especially if you do not have the money today to pay back. The great news is that there are several areas you can focus on to help you avoid common mistakes regarding finances.
- Don’t open new credit cards unless the new card has a low interest rate.
- Don’t consolidate. If you move all your debt into one, it will make your debt look big and your score could be affected.
- Don’t close unused credit cards or credit cards with zero balances, because then your credit-to-debt ratio will be higher.
Once a card goes to collections it stays on your credit score for seven years. Rebuilding credit score takes time and effort and it isn’t fun or easy, but it will be worth it and you will reap the benefits. Don’t start tomorrow, start today!
Contact Skrupa Law Today at (402) 571-2900 in Omaha and (402) 464-3311 in Lincoln
Remember if you need help filing for bankruptcy or want more information on your credit score, contact Skrupa Law today at (402) 571-2900 in Omaha or (402) 464-3311 in Lincoln. We would be happy to answer any questions you may have and get you back on the road to being debt and stress free.