Re-establishing your credit by obtaining new credit can only begin after your bankruptcy case is discharged as credit card usage is prohibited while you’re in bankruptcy. Raising your credit score takes time so we recommend you begin working on it as soon as your case is done. If you wait, you might not have the score you need when you need it for an automobile loan or mortgage. The easiest way to improve your credit is to just continue what you’ve been doing.
Every month that you pay your car, student loan and mortgage payments on time, you’re raising your credit score just a little bit. The balance on the vehicle loan will reduce every month, which decreases your balance to credit limit ratio thereby increasing your score. We recommend that you even make the payments a few days early, and always give at least 5 days delivery time if sending a check through the US mail. If possible, send in extra money to reduce the principal which will result in less overall interest. Send in a separate check and note that it is for “Principal Only” so it will be applied correctly to your account. But only send in that extra if you’ve already paid yourself first.
If you’ve been reading our Money Magic series, you know that to begin making “money magic” you must first pay yourself by saving every month so you’ll have the money when the inevitable medical and repair expenses arise. So if you have a nice cushion of at least $1,000, you might want to pay extra on your automobile or student loan. Otherwise, you’re probably better off putting the extra funds in your account, rather than your bank’s.
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