Good credit is necessary for a wide range of things in life and it applies to much more than getting a loan or a credit card. Potential employers may check applicants’ credit histories before extending an offer of employment. Insurance companies run credit checks to determine their customers’ premiums. Even future spouses may want to make sure the person they marry has good credit. If you have had some problems paying your bills, there are steps to rebuild credit that can help you get back on track.
The steps you take to restore or establish a good credit rating might vary based on how bad your financial situation is at the moment. In some cases, the best way to improve your credit is to file for Chapter 7 or Chapter 13 bankruptcy. When your monthly obligations exceed your income, bankruptcy can help you. Depending on your personal situation, you may even be able to keep your property while you repay your debts. Over time and with timely payments, your credit score will improve.
If your credit is not destroyed already, you may be able to make improvements without bankruptcy. Reducing your outstanding credit card balances can improve your score. Be careful not to close your accounts when they are paid off. Part of your credit score is based on the age of your oldest credit card. If you feel like you need to close an account to reduce the temptation to use it, close one of the most recently established accounts. Before you close an account, you should be aware that applying for new credit might also cause your score to drop.
Another way to make an impact on your credit score is to make all of your payments on time. Late payments negatively impact your score and make you a higher credit risk. Potential lenders want to know that their customers will pay when their bills are due. By taking these steps to rebuild credit, your score will improve slowly over time. Missing a single payment can negate your gains, so be sure you are diligent in getting the payments out to your credit card companies or other lenders well before the due date.
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