How to Rebuild Your Credit Rating After Bankruptcy, Divorce, or Other Life-Changing Events

If you recently went through a divorce, bankruptcy, or other life-changing event that negatively affected your credit score, chances are you’re still dealing emotionally with that event. Unfortunately, the credit reporting agencies that help calculate your credit score don’t give you much time after such an event to prevent your credit score from going down.

A significant drop in your credit score can affect you in many ways, such as how much interest you owe on credit card payments, whether or not you qualify for a car loan, and whether or not you qualify to purchase a new one. House. It can even affect the status of your job application for certain types of employment.

Here are some tips to help you rebuild your credit score after such an event, and you can break them down into small, manageable tasks that allow you to make progress every day:

First, get a current copy of your credit report from the three major credit reporting agencies. You can do this by visiting the Federal Trade Commission website and looking up how you can get your free credit reports. Once you’ve got all three reports, the first thing to do is look for errors. If you find errors, be sure to correct them according to the credit reporting agency’s specific policies. Even if the same error appears on all 3 credit reports, you may need to remedy it in different ways.

The next step is to view your credit score. You can’t get to point “B” (a good credit rating) if you don’t know where you are today! Your current credit score is the “A” point and is the benchmark by which you can determine how much it improves.

Then make sure you set a smart and realistic budget. If you need help saving money, use coupons, online discounts, lower-cost substitutes, or any of the other money-saving techniques you can find in a good book or online. This budget is something you need to stay committed to, so do your best to stick to it. Also look for legal ways to lower your high monthly expenses, such as taxes, insurance (all forms), and luxury purchases.

Of utmost importance, going forward, is to make sure you make your monthly payments on time. Once your credit has been negatively affected, you need to show that you are on your way to becoming a good credit candidate once again. To help rebuild your credit score, you need to show that you’re responsible, so making timely payments is a must.

From there, do everything you can to keep your debt levels as low as possible. No matter what your new credit limits are, you want your debt to be as low as possible so you have the most “buffer” between your current debt levels and your maximum credit amounts. This will reflect on your credit report that you are managing credit responsibly; and help you rebuild your credit.

While these steps may be difficult for you at first, they are the foundation of good financial planning for everyone. Take steps every day to make it a habit, and over time, you’ll be on the right track to rebuilding your credit score after a life-changing event.