Checking Credit Report Accuracy After Bankruptcy
Youre entitled to get a free credit report from the three major credit reporting agencies each year. That should allow enough time for creditors to report the bankruptcy information. Thoroughly review each listed debt for accuracy. Also watch out for unfamiliar creditor names or debts, as they might be discharged debts that were bought and sold to a third party, but are not accurately reflected as having been discharged. To make changes, follow the instructions under the Correcting Misreported Discharged Debt heading. Youll want to claim each of the remaining two credit reports at three-month intervals. Each time, check to see if the credit report reflects the previously requested changes, and, take steps to correct any remaining inaccurate information. This approach should allow you to clean up your credit report at no cost to you.
But Ive Never Missed A Payment I Just Have No Hope Of Ever Paying Off My Debt
If youâre one of the few that has been able to stay current with all debt payments, but need to reorganize your financial situation through a Chapter 13 bankruptcy, your credit score will go down initially.
But, thatâs not the end of the story. Once your bankruptcy discharge is granted, your debt amount will go down significantly! And guess what helps build and maintain good credit? A low debt-to-income ratio.
Put differently, the best credit rating is possible only if your total unsecured debt is as low as possible. A bankruptcy discharge eliminates most, if not all of your debt. Itâs the one thing you can do that your current debt management methods canât accomplish.
Doesnât bankruptcy stay on your record for 10 years?
Well, yes, under federal law, the fact that you filed bankruptcy can stay on your credit report for up to 10 years. This is true for all types of bankruptcy. But, Chapter 13 bankruptcy stays on your credit report for only seven years from the filing date.
According to Experian, thatâs because unlike a Chapter 7 bankruptcy, Chapter 13 involves a repayment plan that pays off some amount of debt before a bankruptcy discharge is granted.
How Bankruptcy Affects Your Credit
Filing for bankruptcy makes it challenging to receive credit cards or lower interest rates because lenders will consider you risky. These consequences could occur immediately, affecting any short-term needs such as getting affordable interest rates or approval from prime lenders.
Rebuilding your credit as soon as possible is paramount. One way to increase your credit score is to pay all your bills on time each month, creating and sticking to a budget and not incurring more debt.
You should also avoid overuse of credit cards and failing to pay balances in full each month. Having a good credit score gives consumers access to more types of loans and lower interest rates, which helps them pay off their debts sooner.
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How To Rebuild Credit After Bankruptcy
Accounts included in a bankruptcy filing wont be reported as unpaid or past due anymore on your credit reports. Assuming you pay new debts on time as you incur them, your credit rating will start to recover.
In the meantime, review your credit reports. Accounts that were discharged as part of your bankruptcy filing should be reported as discharged or included in bankruptcy on your credit reports. They should not show any money owed on them a balance of $0.
If there are errors in a credit report, contact the credit bureau to have the report corrected.
You can also start to rebuild your credit standing by obtaining a new credit card. You may have to resort to obtaining a secured credit card, which requires a deposit with the creditor. A third option is to have a family member or friend who has a good credit history apply for a card with you as a co-signer.
Rebuilding your credit is a gradual process. As you use a credit card and pay on time each month, other creditors will see your good financial habits on your credit report when its time to seek additional credit. It is best to avoid carrying a balance. If you must, it should not exceed 30% of the entire line of credit. You may review some tips to improve your credit score.
Applying For Credit After Bankruptcy
As it can be difficult to get credit after filing bankruptcy, your personal relationship with a lender can be crucial. Having employees or management at a bank, a , or an auto lender who know, trust, and like you makes it easier to get an application accepted.
You rebuild credit after bankruptcy the same way that you build credit before one: with time and a consistent repayment history. If you believe you can continue to repay a preexisting debt during and after bankruptcy, consider a reaffirmation agreement with one of your creditors to help the process of rebuilding your credit score.
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Bankruptcy And Your Credit Score
Your FICO credit score is often the most important determinant in whether you receive credit, how much, and at what interest rate. A higher score means that you can borrow more and at a lower interest rate. Filing bankruptcy can cause your credit score to drop dramatically. If a lender is willing to accept your credit application despite your low score, it is likely to be on less favorable terms.
FICO states that your payment history makes up 35% of your total credit score. It is possible that a bankruptcy filing will not cause a major drop if you already have an inconsistent payment history. Another 30% of your score is the total amount of debt that you owe, which bankruptcy discharge can actually help. However, it is rare that a bankruptcy does not damage your credit score.
So How Can A Bankruptcy Filing Possibly Help My Credit Rating
Think of your credit report like a timeline that dips down when negative information is reported and steadily goes up with every on-time payment you make. After a while, the bankruptcy filing will be nothing more than a blip in your timeline.
Remember, your credit history is â¦ well â¦ history. What you do to improve your personal finances today matters more than what you did last year! Letâs take a look at some of the things you can do to build good credit after a bankruptcy filing.
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What About A Consumer Proposal
Before filing bankruptcy many people will consider filing a consumer proposal.
This is basically an offer to creditors to reduce the debt owed and pay it within a certain fixed period.
It can be useful and help avoid more drastic measures.
The max time period after the date or default for both credit reporting agencies is now six years as of 2019.
With Equifax, this can be shortened to six years, after you have covered all the debts included within the proposal.
With TransUnion, the consumer proposal is removed from your records six years after you have completed and satisfied the proposal or six years after you default.
This ultimately means that you can shorten the time that the consumer proposal remains on your record.
All you need to do is make sure that you are paying off the debt as quickly as you can.
What Is A Credit Report
Your is created the first time you apply for credit or borrow money. It will contain information such as details about your credit cards and loans, including when you opened your accounts, how much you owe, when you make or miss payments, and if you go over your credit limit. A credit report also contains personal information such as if you have ever filed for bankruptcy.
Bankruptcy & Your Credit Score
Unlike what you may have heard – filing bankruptcy does not ruin your credit forever! Itâs one of the biggest myths about bankruptcy.
In reality, many people see their credit score go up almost immediately after filing bankruptcy. If you need debt relief but are worried about how a bankruptcy affects your credit rating, this article is for you. Letâs start at the very beginning…
Negative Information On Your Credit Report Is Treated Differently
According to Experian, one of the three credit bureaus, specific accounts that are delinquent when included in a bankruptcy will be deleted seven years from the date you were initially late with your payment.
This falls in line with the way all negative information, including late payments, are dealt with when it comes to your credit reports. Generally speaking, negative marks like late payments and accounts in collections will stay on your credit reports for seven years before falling off automatically.
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Is My Credit Going To Be Bad As Long As A Bankruptcy Shows Up
Myth: You might as well not even try because youll have poor or bad credit as long as the bankruptcy is on your record.
The truth: Yes, bankruptcy tanks your credit score in the short term. But how much a bankruptcy impacts your credit score depends in part on how old the record is. Like many other types of items reported on your credit file, bankruptcies lose some power over time. Thats especially true if you start managing credit and debt in a more positive way while youre waiting for the bankruptcy to fall off your report.
Some ways to help positively impact your score after bankruptcy can include:
- Adding new credit, such as secured credit cards or small installment loans, to offset the negative information on your credit report.
- Making on-time payments for all debt, new and old.
- Keeping your credit card balances under 30% utilization.
Bankruptcy Information Can Be Wrong
You may want to hire a credit repair attorney if your record shows inaccurate financial or bankruptcy information. They can speak with credit reporting agencies, credit card companies, or credit card issuers if you are having personal finance trouble. An attorney can also step in if a company does not discharge your debt correctly or you fall into a credit counseling scam.
Remember: A bankruptcy discharge legally stops creditors from harassing you. You have rights if a company is not following the process or respecting your bankruptcy filing.
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Discount For Family Members Couples And Active Military
Lexington Law is now offering $50 off the initial set-up fee when you and your spouse or family members sign up together. The one-time $50.00 discount will be automatically applied to both you and your spouses first payment.
Active military members also qualify for a one-time $50 discount off the initial fee.
Consumers Can Seek Chapter 7 Or Chapter 13 Bankruptcy
There are two types of bankruptcy that consumers can choose if their financial situation warrants it: Chapter 7 or Chapter 13 bankruptcy. The type of bankruptcy you choose will ultimately determine how long it remains on your credit report.
Chapter 7 bankruptcy essentially means any unsecured debt will be wiped out with certain limits and restrictions. The other type is Chapter 13 Bankruptcy, which calls for people to continue paying their debt for several years and afterward, a portion of that debt is discharged.
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Learn How To Rebuild Your Credit After Chapter 7 Bankruptcy
Updated By Cara O’Neill, Attorney
Everyone wants to remain debt free after discharging credit card balances, medical bills, and other qualifying debt in Chapter 7 bankruptcy. Enjoy your fresh financial start for years to come by following these tips:
- stay within a budget
- monitor your credit report for errors, and
- learn how to purchase a new car or home relatively shortly after bankruptcy.
If you take control of your finances now, you can be one of the many who prosper following Chapter 7 bankruptcy.
Contact An Experienced North Carolina Bankruptcy Attorney
If you are dealing with overwhelming debt, schedule a free consultation today with our compassionate consumer bankruptcy attorneys to discuss your options. At Sasser Law, youll work directly with a board-certified bankruptcy attorney. We pride ourselves on giving straightforward and honest legal advice.
The Sasser Law Firm serves individuals and businesses throughout North Carolina, including in Wake, Harnett, Johnston, Durham, Orange, Granville, Vance, Franklin, Warren, Nash, Lee, Chatham, and Moore counties.
This post was originally published in October 2019 and has been updated for accuracy and comprehensiveness in August 2021.
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How To Remove A Bankruptcy From Your Credit Report
The credit bureaus have active campaigns online to make you think that its not possible. They pretend to be helpful, but they have ulterior motives. They dont say it outright, but the way they word their interpretation of the Fair Credit Reporting Act makes people think it cant be done.
The worst thing about that is that many top credit sites parrot the information, which makes for a lot of misinformation online. However, as you will see below, you can absolutely remove a bankruptcy from your credit report.
When disputing a bankruptcy, you cant file a dispute with one of the credit bureaus and expect it to apply to all three. Instead, youll have to file three separate disputes with Equifax, Experian, and TransUnion.
Make sure the wording of your dispute doesnt make it sound frivolous. Stick to the facts, and dont get emotional. Sometimes, the less you say, the better. Yes, you have certain protections under the FCRA, but the credit bureaus also have protocols in place to shut down consumers who dont have legitimate disputes.
What If I Need A Loan Or Credit Card Immediately After Bankruptcy
Luckily, most mortgage companies provide FHA loans for scores of 560-600. Traditional financing options often require a score of 600 or higher.
There are options for buying high-cost necessities after filing bankruptcy claims. Secured credit cards and loans exist for those facing bankruptcy. You can look into credit builder loans or other financing options specially built for people after bankruptcy.
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Is Chapter 13 Bankruptcy Better For My Credit Than Chapter 7 Bankruptcy
According to FICO , whether you file for Chapter 13 or Chapter 7 bankruptcy makes no difference to your credit scores. But it’s possible that a potential creditor viewing your credit report might look upon one type of bankruptcy more favorably than another. For example, some creditors might view someone who files for Chapter 13, in which you repay some or all of your debts over a three- to five-year period, as more responsible, and thus a better credit risk, than someone who files for Chapter 7.
Are All Bankruptcies The Same When It Comes To Credit
Myth: Bankruptcy affects the credit of all consumers who file equally, regardless of the amount of debt or the number of debts included.
The truth: Bankruptcies are far from created equal. As already stated above, some stay on your credit longer than others.
Creditors also tend to prefer to see Chapter 13 bankruptcies over Chapter 7 bankruptcies. Thats because Chapter 13 bankruptcy requires you to make some payment on your debt, so it demonstrates that you do try to pay your debts whenever possible. However, that doesnt mean Chapter 13 is the right choice for everyone and every situation.
How much debt you have and how much is included in the bankruptcy can also make an overall difference on how your credit is impacted. In short, your credit is going to suffer, but theres no single number that can be provided for how much it will drop.
How To Reestablish Your Credit
After declaring bankruptcy, you’ll want to look at ways you can earn a score in a range that will qualify you for better financing options and that begins with rebuilding your credit.
You may not be able to immediately qualify for the best credit cards, but there are others that apply to people with less-than-stellar credit.
Secured credit cards require a deposit that acts as your credit limit. If you make your credit card payments on time and in full on this new secured card, you then have a greater chance at qualifying for an unsecured credit card in the near future.
The Capital One® Secured has no annual fee and minimum security deposits of $49, $99 or $200, based on your creditworthiness. Those who qualify for the low $49 or $99 deposits will receive a $200 credit limit. Cardholders can obtain a higher credit limit if they make their first five monthly payments on time.
The Citi® Secured Mastercard® is another option with no annual fee. There is a $200 security deposit required, which would mirror your credit limit. Cardholders can also take advantage of Citi’s special entertainment access, which provides early access to presales and premium seating for concerts and games.
Once you add this new credit car, make sure you pay your monthly bills on time and in full to quickly work your way toward better credit.
How Long Bankruptcy Remains On A Credit Report
Bankruptcies will remain on a credit report for seven to 10 years, depending on if Chapter 7 or Chapter 13 was filed .
- Chapter 13 bankruptcy is deleted from your credit report seven years from the filing date.
- Chapter 7 bankruptcy is deleted 10 years from the filing date.
Consumers do not have to contact a credit agency to have their bankruptcy removed. Whether it is a Chapter 7 or 13 bankruptcy, they are automatically removed after seven or 10 years.
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