As the most important aspect to securing loans and credit, your credit score is valuable. In order to present yourself as a responsible borrower, you must have a good credit score and positive credit standing. There are a few credit traps that people fall into that cause them to miss out on great financial opportunities.
Good vs. Bad Debt
You might think that the difference between good debt and bad debt is obvious. In fact, the line between the two is a fine one. Knowing where to fall between too much debt and too little debt can be tricky. Remember that not all debts are the same and that good debt is characterized by: a balance that you can afford to repay, a balance that is at or below 30% of total credit limit and a history of timely payments.
Bankruptcy And Credit
A common bankruptcy myth is that filing for bankruptcy will damage your credit. This is simply not true. Missing payments and having accounts in a delinquency status lead to credit damage, which happens long before you ever file for bankruptcy. In fact, filing for bankruptcy can improve your credit standing by erasing your debts and giving you a fresh start at rebuilding a positive credit history.
No Credit After Debt
Securing credit is not impossible after a bankruptcy or problems with debt. However, many people jump at the first credit offer they receive, often leading to poor loan terms that can cost you far more in the end. Your past has no bearing on the fact that you deserve the best credit possible, which means shopping around to find the best line of credit for you. Smaller spending limits typically come with better interest rates for people post-bankruptcy or with poor credit. Look for the lowest rates and most flexible terms to begin your new credit history.