It is essential to know and monitor your credit score to know what options you have when considering filing for bankruptcy, debt settlement/negotiation, or even to make sure your identity has not been stolen. You may be attempting to obtain a loan for a car, a mortgage for a home, or apply for a new job, and unforeseen events pop up that affect your credit score in a negative way. Couple that with the fact that over 9-million people have their identities stolen every year, and you have a recipe for disaster if you are not constantly monitoring your credit score. Knowing what your credit score is and what role debt, bankruptcy, and your credit report play is key in determining upcoming financial decisions.
Your Credit Score In Bankruptcy
One of the biggest myths that exist regarding bankruptcy is that it will ruin your credit score for the rest of your life. Nothing could be further from the truth!
If you are considering filing for bankruptcy, it is essential to have a current copy of your credit score and reports for your bankruptcy attorney.
Not having your credit history on hand when your bankruptcy attorney is ready to begin working on your case is a sure fire way to prolong the process and in turn, waste even more money.
It is true that when you initially file for bankruptcy, your credit score will plummet. Proper monitoring before you file will allow you to see the impact so you can compare your credit scores before and after the bankruptcy filing, showing the improvement that will begin taking place. What many people fail to see is how quickly their credit score will rebound post-bankruptcy. When you file bankruptcy, your debt will disappear, and you will have disposable income that you didn’t have before, making it more likely that you will be able to pay for things you purchase in the future.
Normally, within 2-3 years after filing for bankruptcy, you will notice that your credit score is hitting highs you probably never had before. In fact, most people that compare their credit score before bankruptcy, file for bankruptcy, monitor their credit score properly, and keep their spending under control, will notice that their credit score 36-months after filing is probably in the “excellent” range. Begin monitoring your credit score right away — your bankruptcy attorney will appreciate your proactive approach to making the process a smooth transition.
Debt and Your Credit Score
In our credit-driven society, it is not unusual for individuals to carry large amounts of debt — whether on credit cards, loans (payday loans, title loans, car notes), or outstanding medical bills. Don’t be ashamed that you have debt; even the U.S. Government carries trillions of dollars of debt. In certain instances, some debt can actually positively affect your credit score, which most people don’t realize. Let us dispel with some of the myths and show you why you need to know your credit score (or run the risk losing thousands of dollars every year).
Monitoring Your Credit Reports
By monitoring your credit score on a regular basis, you will be able to view how a history of consistently paying on the debt increases your credit score. Think of it like this: a person who has never had a loan or a credit card has no history of paying on that debt. Whereas a person who consistently pays their loans and some credit card debt on time shows the credit bureaus that they are a reliable individual who can be trusted. In turn, this will increase your credit score to a much higher number than those with a history of no credit at all.
Knowing your credit score and adjusting your debt payment habits can allow you to obtain a better interest rate on the debt you carry along with more credit so that you can buy a new car or take out a home equity loan to consolidate some of your other debts. With no understanding or knowledge about your credit score, you will have an extremely difficult time managing your debts properly and might end up wasting literally thousands of dollars in interest payments alone.
Debt Settlement and Your Credit Score
Monitoring your credit score during the debt negotiation or settlement process is highly important as debts are simply not eliminated in these situations as they are during bankruptcy. Through settlement your debt is paid down and the structured payments are negotiated (usually with little to no interest accruing during the payment plan). The changes in your credit score throughout this process let you know whether the payments are making improvements to your credit score.
Your credit score will begin to improve after about 2-years of the debt negotiation process. By the third year, you will notice that your credit score should be in the “good” category. Of course, means that you must have been paying off the right debts for the maximum impact on your credit score. Properly monitoring your credit reports will help you keep realistic debt settlement goals in order. The first step to improving your credit score is knowing your credit score and figuring out what moves you can make to affect it positively.
Credit Score and Stolen Identities
The age of the internet has made millions of American’s lives easier, but there is a catch. With convenient online access to sensitive personal information comes the worry that identify thieves are waiting to steal your information and wreak havoc on your financial life. The Federal Trade Commission (FTC) estimates that 16.6-million people in the U.S. have their identities stolen every year. This staggering number means one thing: anyone is at risk of having their identities stolen. The only sure-fire way to protect yourself is to constantly monitor your credit score and reports looking for big changes that are out of the ordinary.
Identity thieves tend to look for people with both very good credit scores and very bad credit scores because both mean money in their bank. An individual with a good credit score poses a great risk of having their identity stolen for obvious reasons — they are able to obtain high-levels of credit, which the thieves can use to rack up huge amounts of fraudulent debt. However, many people don’t realize that those with a low credit score are even more at risk of having their identities stolen. Identity thieves believe that these people are not monitoring their credit properly and that will help them get away with the scam for a long time. It is essential to always have your credit score available so that you can see if any fraudulent activity is taking place.
How Do I Protect My Credit Score?
There are a handful of ways that you can protect your credit score. The difficult way would be to order a copy of your credit reports and scores multiple times a year. Doing this usually means ordering the reports, waiting at least a month to receive them, going through them with a fine tooth comb to look for any inconsistencies, and reporting the changes appropriately with the proper documentation letting them know that your credit score should not have been impacted negatively. The easy way is to order your credit score information and have the results sent to you automatically on a regular basis allowing you to view any changes for the positive or the negative. Regular monitoring is how you can increase your credit score while decreasing your interest rates and the amount of debt that you owe. Be sure to keep your financial house in order by using your credit score as a gauge for how well you are doing in managing debt.