Financial experts the world over will attest to the importance of maintaining a healthy credit history. Whether you’re applying for a bank loan or signing up for life insurance, a good credit score plays a critical role in opening up financial opportunities for you.
If you have recently filed for bankruptcy, you may feel as though all your financial options have dried out. The good news is that it’s still possible for your credit rating to recover from bankruptcy, provided you follow some very basic precautions to cover your bases.
What you must remember is that bankruptcy doesn't give you a clean slate if you already have a bad credit history. Bankruptcy stays on your record for eight years, so your main priority is to rebuild your credit rating while working within the limitations of your bankruptcy status.
Bankruptcy in Hong Kong
According to the Hong Kong Monetary Authority, the number of bankruptcy cases in the region has risen to as high as over 56% since the turn of the century. At worst, bankruptcy could cost you high-value assets such as real estate or expensive jewelry, as well as your financial freedom. Experts have cited the limited access to detailed financial histories as a frequent issue among bankrupted consumers: because people are ignorant of their own finances and credit history, they fall into patterns of irresponsible spending, excessive credit, and other harmful financial habits. Read up on all of your obligations under bankruptcy and understand your current financial limitations.
Credit Reports in Hong Kong
The go-to name for credit ratings in Hong Kong is TransUnion, a consumer credit reporting company with a global presence spread out over 34 countries and four continents. With services open to both businesses and private individuals, TransUnion provides clients with a comprehensive credit report containing their personal information, account details, debt history, enquiry records, and of course their credit score.
Your TransUnion credit report is vital in helping you do damage control after bankruptcy, so be sure to order a copy as soon as you can. Use your credit report to identify the healthiest credit lines you possess at the moment, and then address any outstanding debts within your means.
Take Responsibility Over Your Credit Lines
One of the simplest ways to reestablish your credit rating is to pay your bills on time, as a way to mend your payment history piece by piece. Always pay all of your credit cards on time, even if you can only manage the minimum monthly amount.
Avoid exceeding your credit limit; spending only within 30% of the limit is the ideal for when you’re rebuilding your credit score. Be cautious when applying for new credit, choosing terms and interest rates that work with your current budget. The sooner you can regain positive credit, the quicker your score will recover.
Control Your Credit, Don’t Erase It
While minimising your debt is crucial in mending your credit score, actions such as canceling your credit cards (even if they’re fully paid) could do more harm than good. A good score relies on a consistent credit history, and canceling any of your credit lines could create holes in your record that would look suspicious to banks and other lenders. Whenever you can, maintain the health of your oldest credit accounts and refrain from late payments. Don’t apply too often for new credit, as frequent enquiries from prospective lenders can reduce your credit score.
Once your credit score has recovered sufficiently, you should now be able to apply for other financial services such as personal loans or hefty insurance policies. Be sure to build a good relationship with your bank in order to get helpful updates on the state of your account. From there, it’s just a matter of maintaining good spending habits to keep your credit score up.
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