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Building Credit After Bankruptcy

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Rebuilding credit after bankruptcy has as much to do with making good financial decisions as working through your credit report to make sure it is accurate. All accounts following a bankruptcy are discharged and should be so noted on the credit report. However, it is common for accounts to remain "delinquent," "open" or "late." These comments are incorrect and must be removed when the consumer makes a dispute.

Although it was once almost impossible to obtain credit after a bankruptcy, many lenders, including credit card companies, make offers to debtors immediately after discharge. The credit card offers may have higher fees, interest rates and even require a security deposit, but you may want to consider opening an account in order to start rebuilding a positive credit rating.

Why is my bankruptcy listed in my credit report?

The bankruptcy is noted on the report because your creditors received notice that you filed and reported it to the credit bureau. Additionally, a bankruptcy is a public record, and credit bureaus routinely search public records for judgments and bankruptcies to note on the credit report.

Is my bankruptcy always going to be part of my credit report?

No. After 10 years, the bankruptcy must be dropped from the report.

Can I get a bankruptcy removed from my credit report before the 10 years is up?

Some consumers have been successful in getting bankruptcies removed because credit bureaus failed to timely verify the information with the court clerk. (Of course, you must initially dispute the information as erroneous.) Under the Fair Credit Reporting Act (FCRA), unverified information must be deleted.

TIP: Even if the credit bureau reports that they have verified the bankruptcy with the court, you should contact the court clerk to confirm. If the credit bureau did not actually contact the clerk, then they did not properly verify and the information must be removed.

Sidebar: Most credit bureaus verify public records information from services (going down to the courthouse is obviously inefficient). Under the FCRA, the court is the only entity that can verify court records.

TIP: If you suspect your public records have not been verified by the court, ask the credit bureau to provide you an explanation of how they verified. An improper verification means the information must be deleted.

My debts were discharged in bankruptcy. Should my credit report still show unpaid balances on my credit card accounts?

No. The balances must be deleted and the accounts should be noted as discharged. If the credit bureau fails to make the corrections, they can be sued under the FCRA. The law requires a violating company to pay $1,000 in damages to the wronged consumer.

TIP: If a credit card company is still showing a balance owing after a bankruptcy discharge, call customer service and request that you be sent a bill. At the same time, remind the person to whom you are speaking that they are attempting to illegally collect a debt that discharged under federal bankruptcy law. You will soon be speaking to a manager and it is probable the report to the credit bureau will be corrected to show a zero balance owing.

TIP: If you have filed bankruptcy, accounts should not be designated as charged off because the accounts were legally discharged by a court order. Although a bankruptcy is noted on your credit history, your score does not need to be further affected by an inaccurate charge-off comment. This is the type of misleading information that should be corrected.

I see that a creditor that I had an account with years ago and closed before my bankruptcy pulled my credit report. Can the company access my account just because they received a notice that I filed for bankruptcy?

No. Many companies subscribe to services that routinely report bankruptcy filings. The sole fact that you filed bankruptcy is not a permissible purpose for an old creditor to pull your file. The company has violated the law. You should write and demand that the hard inquiry be changed to a soft inquiry at once, or deleted all together. If they refuse, the company is liable for at least $1,000 in statutory damages.

Sidebar: Sometimes inquiries cannot be deleted completely, but impermissible hard inquiries can be changed to soft inquiries. The effect of the change can improve a credit score dramatically.

After bankruptcy, my credit card account shows a zero balance on my credit report but still includes prior late payments. Should the late payments be removed as well?

No. The late payments prior to bankruptcy can remain on the credit report. If they have been reported in error, you can dispute them.