A real concern for many who file for bankruptcy in New York is whether they can rebuild their credit score following the end of their bankruptcy case.
Fortunately, there are effective ways to do this. And there’s no magic to them. They’re simply common sense. Here are 5 good ways to improve your post-bankruptcy credit score in New York:
1. Debit, not credit.
Using a debit card still has a positive impact on your credit score. But unlike credit, you don’t risk making purchases you can’t pay for that get you into trouble later.
2. Only have 1 or 2 credit cards max
Having and using credit cards wisely can help build credit. But having more than one or two creates temptation to incur more debt than is healthy. (Of course, you can do that using just one credit card as well. But it can be difficult to function in today’s economy without at least one credit card.) Also, having too many credit cards can hurt your credit score even if you don’t use them. Because if each card has a ceiling of $10,000, then 4 cards means you could potentially be up to $40,000 in debt. That makes you a greater credit risk in the eyes of a lender and gets factored into your credit score in a negative way.
3. Use cash when you can
Using cash takes debt out of the equation. There’s no risk of interest accumulating. No risk of damage to your credit score. Plus, you see and feel the money leaving your hands, and psychologically that tends to make people more conservative (and therefore more responsible) with their money.
4. Don’t get into the habit of financing your lifestyle
The only things you should borrow money for are things you can afford to pay back, things you need to function (e.g., a car) and things that are good investments (e.g., a house or property). If you’re borrowing money to go on vacations, to get high-end electronics or other consumable goods that will not add financial value to your life, you’re borrowing too much. Taking on new loans that you don’t need is the quickest way back to financial problems. And remember, if you just got out of bankruptcy, you won’t be able to file again for a number of years.
5. Keep good track of your debts
Having a credit card in today’s economy is a necessity in many ways. So simply saying, “Don’t use credit cards” is not practical advice for most people. However, if you do plan to incur debt, make sure to keep track of it. It’s easy for your debt to start feeling disconnected from the money you actually do have. Psychologically, it’s easy to put it out of your mind at the time of a transaction. So do what you need to make your brain feel like it’s handing over cash whenever you make a credit card purchase. This mentality will hopefully enable you to manage your debts in a more accurate and responsible way — and that will help you avoid problems down the road.
If you have questions about the post-bankruptcy process, please feel free to contact experienced New York bankruptcy attorney Bruce Weiner for a free initial consultation.