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A New Start After Bankruptcy: Re-establishing Your Good Credit
The higher the score, the safer it is in theory for a lender to extend credit to that individual. Someone with a low score is more likely to be denied credit, and if he or she does get it, the interest rate might be higher. Anything below 600 is considered a bad score, and the chances of getting a loan is extremely low.
October 13, 2011 /Law and Legal PR News/ -- A New Start After Bankruptcy: Re-establishing Your Good Credit
Going through bankruptcy is the beginning of financial healing for an individual or family. Once the burden of debt is lightened, a consumer can set goals for future financial security.
Part of financial security is being able to take out loans and get credit when it makes sense. For example, few can pay cash for a house or car, and most need reasonable access to credit to live normal lives.
A person's credit score is considered important by a lender in deciding whether he or she is creditworthy. Each of three main credit reporting agencies -- CRAs for short -- analyzes certain variables using its own secret formula to come up with a credit score for an individual, usually between 300 and 850. (Experian, Equifax and Trans Union are these CRAs.)
The higher the score, the safer it is in theory for a lender to extend credit to that individual. Someone with a low score is more likely to be denied credit, and if he or she does get it, the interest rate might be higher. Anything below 600 is considered a bad score, and the chances of getting a loan is extremely low.
Credit scores are sometimes also checked by other entities for a variety of reasons relating to consumers' financial well being and even character. These entities include employers, insurers and utilities.
The CRA gathers relevant data (payment history, judgments, collections, debt amount and type, new credit activity and so on) into a credit report and applies its formula to come up with a credit score.
Smart financial choices going forward will bring a score up and re-establish a person's good credit. After bankruptcy, a consumer needs to carefully and methodically take steps to remain current and not overextended. Certain steps can be important such as:
-Reviewing your credit report for mistakes and correcting them with the CRA and whomever reported the wrong information (you are entitled to one free report from each agency once a year)
-Make payments on time and if you can't, contact the lender to make arrangements to catch up and get current
-Avoid letting any account go into collection
This list only scratches the surface. A bankruptcy attorney can advise you on how to rebuild your good credit after insolvency; don't hesitate to get the sound advice you need and deserve.
Article provided by Law Solutions
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