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How Can I Improve My Credit Score after Bankruptcy?

ISN'T MY CREDIT SIMPLY TRASHED FOR A LONG TIME WHEN I FILE BANKRUPTCY?

Having a bankruptcy on your credit record does not mean that you have "no credit" during the period of time that it's there. It is crucial to make a distinction between a bankruptcy filing being on your credit record and the status of your credit record regardless of that bankruptcy entry. Your credit score is based on a multitude of factors, many you have some control over after you file bankruptcy. If your credit record matters to you, there's a lot you can do to improve it.

How much damage a bankruptcy filing will do to your credit score depends a lot on how good your credit was before you filed. If you are current on all of your debts, have lots of assets and relatively few debts, and therefore your credit is good before you file for bankruptcy, then your score will take a significant hit. But most people considering bankruptcy are not so lucky.

If however you are behind on many of your debts, have lots of debts and comparatively few assets, and/or are being sued or chased by creditors in other ways, most likely your credit is already seriously damaged. If you file for bankruptcy, your score will likely be temporarily reduced somewhat but not greatly. More importantly, instead of staying damaged or getting worse, bankruptcy gives you the opportunity to stop the downward spiral and start heading your credit score in the right direction.

WHAT ARE THE PRACTICAL WAYS TO IMPROVE MY CREDIT AFTER FILING BANKRUPTCY?

Follow three main steps:

1. Review and correct credit report errors.

2. Avoid ongoing and future negative credit events.

3. Build positive credit.

These sound simple and commonsensical, not very exciting. But this the genuine path to improving your credit score.

Today's blog post covers the first of these three steps, with the next blog covering the other two.

WHAT ARE THE CONCRETE STEPS FOR REVIEWING AND FIXING MY CREDIT REPORT?

Cleaning up your credit report means getting rid of inaccurate and outdated information, and correcting anything that is not correct. It does not mean getting rid of accurate information, anything that has a legitimate right to be on your report. Businesses which claim that they can "repair your credit" and hugely boost your credit score are usually misleading or outright fraudulent. Whatever can be done legitimately, you should be able to do yourself.

Be motivated by the reality that credit reports usually do have errors. These often include inaccurate information on how the account was closed, stale data that should be deleted, and information on accounts that aren't even yours.

Here are the four steps involved for correcting your credit reports:

Step #1: Get copies of your credit reports.

Most people will only be concerned with credit reports from the three major credit reporting companies -- Equifax, TransUnion, and Experian. You are legally entitled to one free copy from each credit reporting agency every 12 months. Here is the centralized website sponsored by these three agencies for conveniently ordering your credit report(s):

www.annualcreditreport.com

In some circumstances, you can get free copies more often than annually. You should get your reports from all three agencies because they may each contain some different information.

In addition to these nationwide reporting agencies, there are also specialty consumer reporting agencies, such as those used by residential landlords for potential tenants, by employers, and by insurance companies. These often have more specialized information. You are entitled to one free annual report from these agencies as well, although finding out which ones have information on you and which is being used by your potential landlord/employer/insurer can be problematic. Try to ask which one is used and then getting a report from it.

Step Two: Review your credit reports.

Do a careful review of each of your reports, looking for anything that is inaccurate or incomplete, circling each troublesome item. Here's a handy checklist of what to look for in this process:

In the Personal Information section:

  • incorrect or incomplete identifying information like your name, address, or phone number, Social Security number, or birth date
  • incorrect, missing, or outdated employment information and marital status

In the Public Records section:

  • lawsuits you were not involved in, or those more than 7 years after entry of judgment
  • a bankruptcy you filed more than 10 years ago, or without identifying the chapter filed under, or filed by a spouse or ex-spouse without you
  • tax, judgment, mechanic's, or other liens listed as unpaid when they were either paid or released
  • criminal arrest records more than 7 years old

In the Credit Accounts section:

  • debts not showing a zero balance in spite of being discharged in bankruptcy
  • accounts belonging to someone with the same or similar name
  • account listed as joint, when only your spouse is responsible for the account, or vice versa, including those incurred before the marriage
  • incorrect account histories, for example a late payment on an account you always paid on time
  • a voluntary surrender of your vehicle inaccurately listed as a repossession
  • closed accounts incorrectly listed as open, making you look like you have too much open credit
  • accounts you closed that don't say "closed by consumer," looking like they were closed by the creditors
  • late payments or other time-sensitive indications that don't state the date or do so inaccurately
  • accounts that don't show that they were turned over to a collection agency, so they look like two overdue accounts
  • adverse information that is more than seven years old, including late payments, charge offs, sent to collection, or overdue child support

Step #3: Make a list and get supporting documents.

Make an itemized list of whatever you found that is wrong, inaccurate, incomplete or outdated. Gather supporting documents that provide evidence of the error. For example, make sure that you have in your records a copy of the "Schedules" of the debts that were filed at court in your bankruptcy case, along with the bankruptcy court's order discharging (writing off) the debts, to dispute debts that a credit report erroneously shows as still owing.

Step #4: Send a letter to the credit reporting agency disputing the errors.

Send a detailed itemization of the problems to the pertinent agency, specifying the error and the reason it is erroneous, referencing whatever supporting documents you have. Don't use the forms the credit reporting agencies provide because they are too limiting. Except in the simplest situations don't use the available online dispute procedures (in part because you can't provide any supporting paperwork).

Type the letter; don't handwrite it, for the sake of readability and professionalism. Send it and the copied attachments to the address provided by the credit reporting agency for disputing information. Get their addresses for dispute letters from their websites, as follows:

Equifax -- www.equifax.com

TransUnion LLC -- www.transunion.com

Experian -- www.experian.com

Also, enclose copies of any documents you have that support your claim, along with a copy of your credit report with the disputed items highlighted. Keep a copy of your letter and the highlighted credit report; keep your original documents.

When the credit reporting agency receives your letter, it must either:

  • delete the disputed items from your credit report within three business days after receiving your dispute; or
  • investigate the items.

If it deletes the incorrect information, it must contact you by telephone, send written confirmation, and provide a copy of a new credit report within 5 days.

If it does not delete the information within 3 business days, the credit reporting agency must:

  • contact the creditor reporting the disputed information within 5 business days
  • complete its investigation within 30 or 45 days depending on the circumstances (whether you received a free credit report, and whether you sent supplemental information), and
  • provide you with the results of its reinvestigation within five business days of completion, including a revised credit report if any changes were made.

You will not be charged any fees for any of this.

Please visit my website for another blog post soon about other steps for improving your credit record after bankruptcy.

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