| Credit After Bankruptcy
Thinking of applying for a new mortgage while the interest rates are lower. First, I would suggest that you do everything possible to improve your credit score to get the best possible interest rate before apply for a mortgage.
To improve your credit score, the right place to start is to find out what your score is. To do this you can get a free copy of your credit report once a year from one of the three credit reporting bureaus—Equifax, Experian, and Transunion. Obtaining this copy will not affect your credit score. Examine your credit report for any mistakes, update your personal or employment information, and ask the bureau to remove any incorrect information. Examine which scoring system is being used. Under the new scoring system called Vantage Score, the lowest number is 501 and the highest possible is 990. A lender now considers 901-990 as “A” credit rating, 801-900 as “B” credit rating, 701-800 a “C” rating, and so on at 100 point intervals. This differs from the old FICO scoring, which has a range from 300 to 850. Under FICO credit scoring, anything under 620 is considered average, and above 720 is considered a good credit score.
Improving credit- follow these steps:
- Pay all bills on time. Note that payments less than 30 days late are not generally reported to the credit bureau.
- Try to keep your credit card balances below 50% of the limit. Lenders like to see existing available credit.
- Avoid inquiries, because a large number of inquiries over a short period of time may be interpreted as opening several lines of credit at the same time due to financial problems, and will lower your score.
- Know that the longer the track record or history of paying bills on time, the better.
- Do not close existing unused accounts. This advice differs from the past. When you close an account, you now have less available credit overall to draw from, and have reduced the overall debt to availability of the unused credit ratio. Closing an account may also reduce the length of your credit history depending on the age of that account.
While bankruptcies or judgments can remain on your credit report for ten years, it is a weighted scale. The older the event gets, the less important it is to a new lender. Most lenders look for a pattern of payments made on time over time, rather than focusing on one single event. |
