I had a bankruptcy. How can I raise my credit score?

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Q. I had a bankruptcy in my 20s. I’m now 40 but my credit isn’t so hot. I only have one credit card and I pay it off, but I barely use it. I use my debit card most often because I don’t want to spend money I don’t have. I have a car loan and I pay on time but it’s still a 7% interest rate, and I rent. What can I do to make my credit better?
— Frustrated

A. Thank you for your question.

We’re sorry to hear about your credit situation.

Most people who file for bankruptcy can have perfect credit within two years, said Karra Kingston, a bankruptcy attorney in Union City.

“For most people who file, bankruptcy should not have such a long-lasting impact on a credit report,” she said. “Bankruptcy is a tool that is available to give people a fresh start.”

There are many items that make up a credit score, she said.

First is the debt-to-income ratio.

“This is the amount of debt you have compared to your available credit,” Kingston said. “Lenders want to know that you can repay your debt. Therefore, if you use too much of your available credit, this could bring down your credit score.”

Then there’s your payment history, which Kingston said is the most important factor when computing a credit score.

“Payment history accounts for 35% of your score,” she said. “This means that timely payments are extremely important to lenders because they want to be sure that you can repay your debts.”

Your length of credit history, or how long you have had credit accounts open, also counts, she said. This accounts for 15 percent of your FICO credit score. The longer you have your accounts open, the better your credit score will be, she said.

New credit also counts.

“Lenders like to see a diverse portfolio. However, too many hard inquiries on your credit could be causing you to have a lower credit score,” she said, noting that it’s important not to open a bunch of new accounts at once.

Finally, your mix of credit is also considered.

“Having a diverse portfolio is essential when it comes to a good credit score,” she said. “People who have different accounts such as student loans, credit cards, car loans, often see a bump in their credit score.”

In terms of your score, you may want to review your credit to ensure that things are being accurately reported to the credit bureaus.

You can get copies of your reports once a year from the three major credit bureaus — Experian, Equifax and TransUnion — at annualcreditreport.com.

If you find items that are not accurate, you can file a dispute with the bureaus, Kingston said.

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This story was originally published on March 18, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.