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Credit Scores: Know When to Hold ‘Em.

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Everyone wants a higher credit score. And why not? A higher score means lower interest rates, which means more money for you and less for your lender.

But a Credit.com reader using the screen name “Linda” has especially high hopes. Linda declared bankruptcy in September 2005. Since then she hasn’t been late with a single payment on her school loan, car loan or mortgage. She uses just 1% of the credit available to her on her credit card.

Linda is being good, but she’s not getting the recognition she feels she deserves.

“I cannot get my credit score above 710,” Linda writes in response to a recent story. “Any advice???”

Our credit scoring expert Barry Paperno has several pieces of advice, actually, but it might not be what Linda wants to hear. First, Linda should consider herself lucky. A credit score of 710 means she’s doing quite well.

“She has a high score for somebody with a bankruptcy,” says Paperno.

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Free Tool: Credit Report CardAfter that, the best advice for Linda is simply to wait. If she filed a Chapter 13 bankruptcy, it will drop off her credit report seven years from when it was filed, meaning that any week now the bankruptcy and the credit accounts it discharged should be dropping off Linda’s credit history. If her bankruptcy was a Chapter 7, she still has three more years to wait.

Whether it’s three years or just a little over a month, the disappearance of the bankruptcy should do Linda some good. Either way, Linda already made a good decision by keeping her mortgage and car loans through the bankruptcy, which gives her a longer credit history than if the court had wiped away all her debts.

“She might get a bump in her score when they do come off,” Paperno says.

And no matter which type of bankruptcy she filed, Paperno says, Linda should just keep doing what she’s doing: Making her payments on time and keeping her credit utilization rate down. That way, Linda’s score will go up pretty much on its own.

“Then it’s a matter of her length of credit history,” Paperno says. “So just keep doing what’s she’s doing, and her score will work its way up.”

In the end, it’s always good for consumers to be proactive and do what they can to build their credit scores. But at least in Linda’s case, it’s important to recognize when a perfectly good score is actually great news.

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Image: teclasorg, via Flickr

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