Path To Credit Recovery
If you are avoiding talking to a bankruptcy trustee because you are concerned about how your credit will be affected, its important to consider two factors:
If debt is holding you back from rebuilding your credit, talk with a Licensed Insolvency Trustee about how to eliminate; your debt. We provide free, no-obligations consultations during which we will conduct a full debt assessment and provide you with options to get out of debt so you can build a stronger financial future.
Reporting Debts As Discharged In Bankruptcy
While it might be daunting to think about a bankruptcy filing showing up on your for ten years, it might not be as bad as you think. A bankruptcy discharge can help you clean up debt much faster than you’d be able to do yourself.
For instance, instead of a delinquent or unpaid debt lingering on your report for years, it will show as being discharged as part of your bankruptcy. In fact, creditors won’t be able to report your debt in a variety of ways that could cause your credit to suffer, such as allowing the obligation to show as:
- currently owed or active
- having a balance due, or
- converted to a new type of debt .
Such reporting labels are often the reason creditors deny applicants credit. In some cases, applicants must pay off such debt as a condition of loan approval. Instead, when you pull your report, each qualifying debt should be reported as:
- having a zero balance, and
- discharged, “included in bankruptcy,” or similar language.
Unfortunately, some creditors don’t update information to the credit reporting agencies. This tactic could be a way to get you to pay up, even though you no longer legally owe the debt. If your credit report shows an improperly labeled discharged debt, you’ll want to take steps to correct the problem.
How Long Does A Chapter 7 Bankruptcy Stay On Your Credit Report
After you file for a Chapter 7 bankruptcy, it remains on your for up to ten years and youre allowed to discharge some or all of your debts. When you discharge your debts, a lender cant collect the debt and youre no longer responsible for repaying it.
If a discharged debt was reported as delinquent before you filed for bankruptcy, it will fall off of your credit report seven years from the date of delinquency. However, if a debt wasnt reported delinquent before you filed for bankruptcy, it will be removed seven years from the date you filed.
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Checking A Credit Report For Accuracy
It’s prudent to review your credit report from time to time, even if you aren’t considering bankruptcy. One way to check is by taking advantage of the free copy from each of the three major credit bureausExperian, TransUnion, and Equifaxthat you’re entitled to once per year at no cost. The website for ordering your credit reports is www.annualcreditreport.com.
It’s important to review all three carefully because not all creditors report to all three agencies. A few months after filing your bankruptcy, each of your creditors should notate that the account was included in bankruptcy. If not, it’s a good idea to have that corrected because any line item that appears open but unpaid could lead a potential lender to believe that you’re still responsible for paying that debt.
Your credit report should also identify whether your Chapter 7 bankruptcy case was discharged or dismissed. A successful bankruptcy that leads to a discharge has a different effect on a potential lender’s decision to grant you credit than if the bankruptcy had been dismissed, leaving your account liability intact.
It’s a good idea to address any errors you see as soon possible. You can do this by disputing the item, either through the credit bureau’s website or by sending a letter directly.
What Happens To Your Credit Score When Derogatory Marks Fall Off Your Report
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit scores may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
If a negative item on your credit report is older than seven years, you can dispute the information with the credit bureau and ask to have it deleted from your credit report.
Correcting Misreported Discharged Debt
Disputing errors is relatively straightforward. You’ll do so by using the online procedure provided by each of the three major credit reporting agencies.
A creditor who repeatedly refuses to report your discharged debt properly might be in violation of the bankruptcy discharge injunction prohibiting creditors from trying to collect on discharged debts. If you take steps to remedy the misreporting, and the creditor refuses to fix the error, talk to a bankruptcy attorney.
Make Sure The Right Accounts Were Reported
After your debts are discharged, review your credit reports to make sure that only the accounts that were part of your bankruptcy are reported by the as discharged or included in bankruptcy on your reports. If you find mistakes, notify the credit bureaus and dispute the errors on your credit reports .
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How Credit Scores Work
First, lets take a look at how your credit score is calculated in the first place. You have credit scores from each of the three major credit bureaus: TransUnion, Equifax, and Experian. These bureaus track all of your credit activity. That includes the use of your credit cards and whether you pay them in full, your student loans, mortgages, auto loans, and more. Each item the bureaus track is factored into your credit score, which ranges from 280 to 850.
The exact mechanism by which the bureaus arrive at an individuals credit score is proprietary they keep it secret so that, in theory, no one can game the system. However, FICO recently released some data about how much certain common events will affect your credit score, called damage points.
Your score affects your access to all sorts of things. It will show up when you want to get a credit card or a loan, for example. If you want to rent an apartment or get a cell phone plan, theyll check your credit. Some employers may even check your score when you apply for a job.
Student Loan Delinquency Or Default
Late student loan payments can start to hurt your credit after 30 days for private student loans and 90 days for federal student loans, and those delinquencies stay on your credit report for seven years.
Federal student loans go into default if you dont make a payment for 270 days. And the government has strong debt-collection powers: It can garnish your wages, Social Security benefits or tax refunds. With private student loans, your lender can term you in default as soon as youre late, but it has to take you to court before it can force repayment.
What to do: If youve paid late but havent defaulted, consider switching to an income-driven repayment plan, putting your loan in deferment or forbearance, or asking your lender for a modified payment plan.
If youve defaulted on your federal student loans, the government offers three options: Repayment, rehabilitation and consolidation.
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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.
Consider Applying For A Secured Credit Card
After filing for bankruptcy, its unlikely that you will qualify for a traditional credit card. However, you may qualify for a secured credit card. A secured credit card is a credit card that requires a security depositthis deposit establishes your credit limit.
As you repay your balance, the credit card issuer usually reports your payments to the three credit bureaus. Repaying your balance on time can help you build credit. Once you cancel the card, a credit card provider typically issues you a refund for your deposit.
When shopping for secured credit cards, compare annual fees, minimum deposit amounts and interest rates to secure the best deal.
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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What Should You Do To Improve Your Credit Score After A Bankruptcy
After you have filed for bankruptcy, it will be very difficult for you to be approved for any type of credit, including regular unsecured credit cards. So, you should ease back into borrowing money by applying for a secured credit card. A secured card is just as good for your credit as is an unsecured credit card, but there is a difference. With a secured credit card, your credit limit is determined by a security deposit that you give the issuer.
For example, if you want a $500 credit limit, the card issuer will ask you for a $500 deposit. The security deposit is kept by the bank as collateral in the event that you fail to repay your credit card. Usually, if you use the credit card and make all of your payments on time, the card issuer will return the security deposit to you within 12 to 18 months.
Dont be discouraged from applying for a secured credit card after your debt has been discharged. Its one of the greatest ways to build a good credit history after bankruptcy. That said, make sure to make all of your payments on time and dont fall back into the bad habits that cause you to file for bankruptcy the first time.
Here are some quick tips on improving your credit score:
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Chapter 7 Vs Chapter 13
Chapter 7 and Chapter 13 bankruptcies are the two most common types of consumer bankruptcies. The process for each is different, as is the length of time they remain on your credit report.
In a Chapter 7 bankruptcy, also known as straight or liquidation bankruptcy, there is no repayment of debt. Because all your debts are wiped out, Chapter 7 has the most serious effect on your credit and will remain on your credit report for 10 years. The accounts included in the bankruptcy, however, are removed from the credit report earlier than that.
In a Chapter 13 bankruptcy, your debts are restructured and you typically pay a portion of them over three to five years. A Chapter 13 bankruptcy is deleted seven years from the filing date and has a lesser effect on your credit than Chapter 7.
How To Build Your Credit After Bankruptcy
A bankruptcy is a devastating and life-altering event that can leave some serious emotional scars. But just because youve got bankruptcy or other negative info clouding up your credit history, it doesnt mean your life is over. You can come back from a bankruptcy, and it starts with dusting yourself off and learning from your mistakes. Here are some ways to help rebuild your financial stability after a bankruptcy.
Rebuilding Credit After Chapter 7 Bankruptcy
Keeping your available credit high is a factor that drives up your credit score, along with maintaining a mix of credit types, such as a home loan, car loan, and credit card accounts. So when you begin using credit again, you’ll want to keep balances below 30%. Keep reading for other factors to consider.
How Long Does Bankruptcy Take To Fall Off Your Credit Report
How long a bankruptcy takes to fall off your credit report depends on the type of bankruptcy that you filed. If you filed for Chapter 7 bankruptcy, it takes 10 years for it to fall off your credit report. However, if you filed Chapter 13 bankruptcy, it takes seven years from the date you filed for bankruptcy for the bankruptcy to fall off your credit report.
After waiting for 7 to 10 years, depending on the type of bankruptcy that you filed, the bankruptcy should be automatically removed from your credit report. If for any reason the bankruptcy remains on your credit report for longer, you should dispute it through the credit reporting bureaus to have it removed.
That said, if not enough time has passed since youve filed for bankruptcy, the credit reporting bureaus will refuse to remove it. They will remove it only if the prescribed time has passed or if there are any inaccuracies on your credit report.
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What Is Credit Reporting And How Does It Affect Me
In Canada there are two major credit reporting agencies; Equifax and TransUnion. Most people commonly refer to these agencies as the credit bureaus. Credit reporting agencies do exactly that: they report credit history. They can also be referred to as an information service as they provide copies of your credit report to potential lenders. This allows the banks and other lenders to determine how much risk they are taking when they loan you money. Whenever anyone lends money they are taking a risk that it will not be repaid.
To get any significant credit, you need a good borrowing history.
Approximately once each month every major lender in Canada sends a report about their borrowers to the credit bureaus. Also, the federal Superintendent of Bankruptcy reports a list of everyone who filed a consumer proposal or bankruptcy to the credit bureaus, as well as a list of everyone who has been discharged. The credit bureaus collect this information, summarize it, and sell it to their members, the lenders.
When you apply for credit you normally sign an application that provides the lender consent to access your credit history. Generally this consent allows then access not only the first time you apply, but anytime afterwards as well, as long as your account is open. It is also this consent that allows the lender to provide the bureau information on your payments etc. once you have been approved.
Let The Law Offices Of Kretzer And Volberding Pc Help You Navigate Bankruptcy
With an open mind and a skilled attorney guiding you every step of the way, bankruptcy does not have to represent financial hopelessness but instead can be about your empowerment and a chance at a fresh start. You will need a lawyer with specific experience on bankruptcy in Texas and who has the right knowledge and resources to help you.
How A Bankruptcy Filing Affects Your Credit Score
When you file for bankruptcy, your credit score will drop. The range of the drop is usually 130 to 240 points. Typically, people who have a higher credit score of over 700 points lose more points. If you already have a poor credit score, the deduction of these points may not really affect you that much.
When you have a bankruptcy on your credit score, it can be difficult to get approval for new credit and get the best deals people with excellent credit scores enjoy. For example, if you are planning to;get a cell phone plan with bad credit, you will not be eligible to get the best deals available that require no deposit or no upfront fees. If you have bad credit due to a bankruptcy, you may have to settle for a no credit check cell phone plan where you have to buy the device in full and prepay your usage.