Help to Reestablish Credit

A drop in your credit rating after a bankruptcy doesn't have to result in a lifetime of bad credit. Reestablishing credit after experiencing severe credit problems is key to fixing a low credit score. There are several methods for rebuilding or reestablishing credit; and the sooner you start, the sooner you can achieve a prime rating.

Review Credit Report

Start reestablishing your credit history by checking your personal credit file (see Resources). You're checking your credit report for inaccuracies that can reduce your score; and if you recently filed bankruptcy, checking your report ensures that the appropriate debts were included in your bankruptcy, which means you're no longer liable for them. Credit reports can include mistakes. For example, your creditors may mix accounts and list a delinquency or collection account on your report in error. Dispute these errors to help reestablish your credit and raise your score.

Credit Cards

Acquiring credit is key to reestablishing credit. Unfortunately, some creditors will not give you a credit card or loan with a poor credit history. To rebuild your credit history, apply for credit with a bank that offers secured credit cards. These types of accounts are readily available to people with no credit history and those looking to reestablish their credit. Getting approved requires paying a security deposit to the bank or card issuer, and your credit limit equals the deposited amount.

Timeliness

Building a good credit score calls for smart credit habits. One smart habit involves making your credit card and other loan payments on time each month. Payment record is a huge factor in credit scoring, and regularly missing payments will decrease your score and inhibit all efforts to reestablish your credit. MyFICO.com says that payments to creditors make up 35 percent of scores. Set up automatic payment schedules or pay several days early to avoid lateness.

Reduce Debt

Credit scores also factor in how much debt you owe. In fact, outstanding balances are another major factor in your score. Reestablishing a good credit history involves not only paying your creditors, but paying down your debts. Whether you have a secured or unsecured credit card, start a habit of paying off balances in full each month, or at least widen the gap between the credit limit and what you owe. Ideally, balances should not exceed 30 percent of your credit limit, says MSN Money.