When it comes to challenging your current financial habits after coming out of bankruptcy, it is essential that you are being mindful and acknowledging certain behaviors that you may have surrounding money. Thinking about your spending or saving habits is essential for avoiding falling into bankruptcy all over again.
Check out your credit score after filing chapter 13 for more details on the importance of your credit score. Here are some useful tips that can help you to start working on your credit score gradually.
Make Payments On Time
First of all, you can build your credit score by ensuring that every regular payment is being made on time. This includes things like utilities, rent, mortgage payments, and outstanding loans. One of the most common mistakes that people make when it comes to managing their credit is forgetting to pay their bills on time.
Because of this, it is recommended that you set direct debit or automated payments from your bank account before your bills are due. Not only does this allow you to start working towards a better credit score, but it can also help you to manage your money better.
This is because it is easier to get a realistic idea about the funds left over once your bills are paid on time every month.
Regularly Check Your Credit Score
Working on your credit score can be unrewarding as a whole, because it is a process that takes a lot of time to see the benefits. This can make it easy to fall into old habits, and limit your progress that has already been made. In order to keep track of your efforts, it is highly recommended that you are making a conscious effort to check your credit score frequently.
This can be done every two months, or more often if you like. Consider using this as a chance to assess how well you are doing, and whether you need to adjust your expectations in terms of rebuilding your credit score.
Remember that it takes time to achieve, so you will need to be patient and committed to working towards a better credit score following bankruptcy. Ensure that you are consistently using the same software to check your credit score.
Start A Savings Account
Another approach that can allow you to gradually improve your credit score is to open a savings account. This is ideal for emergencies and for providing a little financial stability. Of course, this isn’t always possible after coming out of bankruptcy.
However, it is highly recommended that you are putting small amounts of money into a savings account if you have the funds to do so. There are numerous savings accounts to choose from nowadays, that it is worth researching the benefits, security, and interest rates available.
Use your savings account as protection from unexpected bills, significant expenses such as a loved one needing urgent medical attention, or anything necessary. Investing in the stock market is not recommended at this point, because it poses slightly more of a risk to your money than a savings account does.
Avoid Credit Card Use
One of the biggest disadvantages that comes from using credit cards is that many people don’t feel as if they are spending “real” money. This is because they are using borrowed money that is repaid at the end of the month. As a result, this has led to poor spending habits arising.
It is easy to feel as if the money does not really exist, but this is a slippery slope to fall down. Avoid falling into these habits so that you are able to pay the credit card bill when it is due. Excessive spending is one of the most common issues with credit cards.
If you find yourself falling into these habits, then it could be worth limiting how much you use it for. Similarly, you could set yourself a spending cap or cancel your credit card for a month to see how you do. Failure to pay your credit card bill on time can have substantial negative effects on your credit score.
Set A Realistic Budget And Stick To It
Finally, a budget should not be overlooked when it comes to building your credit score. This is because it can allow you to make more conscious decisions in terms of saving as well as spending. Not only that, but a budget can help you keep track of your spending and create more suitable spending habits in accordance with your lifestyle.
Consider setting a budget so that you can get a better picture of your regular outgoings and income for the month. This can encourage you to make necessary changes including finding cheaper rent or utility providers. Similarly, it could be worth searching for a higher earning job or asking your superiors for a pay rise.
Luckily, there are a range of tools available to choose from which can allow you to keep track of your spending and whether you are sticking to your budget. Consider browsing these resources so that you can find something that works best for you.
Summary
There are multiple ways that you can begin working towards a better credit score after bankruptcy, and it can be difficult to keep track of your progress. Because of this, it is highly recommended that you are avoiding impulsive purchases where possible and creating better savings habits.
Building a credit score takes time, and it is worth setting realistic goals for yourself that can help you to stay on track. Consider the different methods that help motivate you, so that you can work on more financially sustainable goals in the future.
In many instances, your credit score will be looked at by banks, employers, and potential landlords. This is usually done to determine how likely you are to meet your financial goals consistently. Consider the tips above in order to challenge your current relationship with your credit score, and significantly improve your chances of progressing in the long run.
