Bankruptcy is one of the most negative events that can appear on a consumer credit report. Anyone who tells you otherwise is either sugar-coating the truth or is not very experienced in these matters. The key phrase is “one of” the most negative events, because most lenders consider repossession, foreclosure and referral to collections as more negative than bankruptcy – in most of those situations, the borrowers simply gave up.
Chapter 7 Bankruptcy means a fresh financial start for you and your family, and there are some proven methods to help you raise your credit score.
Theoretically, all the debts included in Schedule E should have a remark that the account was included in bankruptcy. Pragmatically, some do and some don’t. Sometimes the entity is a recent debt-buyer who did not receive notice of the filing, sometimes the paperwork gets lost in the shuffle, and sometimes the moneylender simply refuses to update its records.
The Fair Credit Reporting Act gives you the power to dispute any inaccuracies in your report. It may seem tedious to contest every little error, but when you are rebuilding your FICO score, every point counts.
When you seek a mortgage loan or other credit, you will pay a higher interest rate and you may even be denied altogether, if it is too soon after your discharge. Always be upfront with the lender by informing the loan officers about your credit history before they run your report. If at least twelve or 18 months have passed since the discharge, you have no new problems and you have a reasonable explanation for what happened, most lenders are willing to work with you.
One of the best ways to build credit history is to borrow money and timely repay it. A secured credit card is a good option for many families. Watch your credit report, because some cards state that they are secured, and your FICO score may not increase as much. There is some debate as to whether you should leave a small balance on the card or pay it off every month. The best thing to do is to experiment with both methods, and see how it affects your score.
Also, pay your existing bills on time, especially those accounts that are reported to the credit bureaus, like home mortgages and auto loans. Never leave a balance and do not be even one day late, if at all possible.
Contact John Hargrave and Associates
We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.