Maintaining and Rebuilding Your Credit

Let’s face it, we live in a world that revolves around credit. These days, you cannot purchase a home or car, or even be hired for some jobs, without a “good” credit score.

The problem is, most of us don’t know how to properly maintain our credit to keep it “good.”

Once we’ve lost control of our credit, we may have to seek debt relief, sell off assets, face repossession and/or even look at declaring bankruptcy to help us recover.

No one wants to face any of these difficult choices.

Here are some simple tips to keep in mind when dealing with your credit either pre- or post-bankruptcy.

Practice self-discipline.

Some companies provide credit with the hope that you will be irresponsible and overextend yourself financially. This way, they can penalize you with large fees they get to pocket. The best way to approach credit self-discipline, is to limit your sources of credit and maintain them. Have between 3 to 5 credit cards, including a gas card, and use them wisely. Your ability to use these cards responsibly, along with making timely payments on your rent/mortgage, cars and other regular bills, will provide you a solid foundation from which to grow your credit.

Keep your balances low but do use your credit cards.

Remember “ashes to ashes, dust to dust. If you don’t take it out and use it, it is going to rust.” Just having credit open will do nothing for your credit score. Have a card for groceries, have a card for incidentals (car repair, maintenance, appliance replacement, etc.), have a gas card and one for entertainment (dinners, dates, movies, etc.). If you’re diligent and stick to your budget, having these credit cards will help rebuild and maintain your credit score. Over time, responsible spending and timely payments will turn into a healthy credit score.

NEVER pay off your balances on credit card accounts completely.

This may seem counterintuitive, but it will hurt you in the long run. We all know credit card companies are in business to make money. If they’re not earning interest from the “money” they have lent you, you’re no longer a valuable asset to them, and they will eventually close your account. The trick is to pay down your balance until about 5-10% remains. If your debt owed is $100.00, pay $90.00 to maintain a balance on the account, thus providing your creditor with a very small interest fee to pocket.

If you stick to a budget, limit your credit sources and practice self-discipline, you will be able to recover from or avoid bankruptcy altogether.