How To Improve Your Credit Score After Bankruptcy-Part 10

Retained but Not Reaffirmed Mortgage Debt:

1. If you are trying to refinance your home mortgage but didn’t reaffirm this debt in your bankruptcy you could be facing a serious problem.  Without a reaffirmation some mortgage companies are refusing to report any payments received since the bankruptcy filing. This may severely hurt your credit score and jeopardize any change of refinancing.
2. Unfortunately, a reaffirmation can only be done while the bankruptcy case is open and before the discharge, so it is too late usually to do anything about it when the typical consumer discovers the problem.
3. Why not reaffirm? If you reaffirmed your bankruptcy attorney would have had to certify to the court that it wouldn’t be a hardship for you to make the mortgage payments. A lot of times debtors can’t really afford to keep their homes, so the attorney encourages them not to reaffirm just in case they have to eventually surrender it. That way the debt is discharged and the lender can’t come after them later.
4. Since the debt has been discharged the mortgage companies only have an obligation to report the discharge, a zero balance owed and report the status as “Discharged in Bankruptcy.” They usually won’t report continued payments because that would require showing a debt owed and would be a discharge violation. I have been able to get some mortgage companies to accept a waiver and consent from the debtor authorizing them to continue to report the mortgage debt despite the discharge, but you can’t force them to do it. Once the debt is discharged all they are legally required to do is report the discharge and a balance of zero.
5. Some creditors will not give credit to any person who has gone through a recent bankruptcy period, so don’t be discouraged if you get turned down. It is their choice whether to extend credit or not. But just because one turns you down it doesn’t mean others won’t extend you credit. There are other factors too like income, employment, marital status, and recent credit activity since the bankruptcy that they take into consideration.

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How To Improve Your Credit Score After Bankrutcy-Part 5

Applying for New Credit to Improve Your Credit Score

a. If you have an auto or home loan that you have reaffirmed you won’t need to apply for a credit card to reestablish your credit. Just paying these bills on time is all you need to worry about.

b. If you are still paying on a car or home loan but didn’t reaffirm the debt the creditor may not be reporting to the credit bureaus so your credit won’t bounce back the way it should. Sometimes you can get these creditors to begin reporting again but you will have to contact their bankruptcy department and ask them to start reporting. They will probably need you to sign a waiver since reporting a discharge debt would be a discharge violation. Because of this some creditors will still refuse to report current house or car payments to the bureaus even if you offer to give them a waiver. But it won’t hurt to try. 

c. If you have no open credit accounts that are reporting to the bureaus after you get your discharge, you may want to apply for an auto loan or credit card so you can start building your credit again. If you do, follow these rules:

i. First you need to do a family budget to see if you can afford a credit card.

(1) write down your family net income (after taxes and deductions)

(2) make a list of all your expenses each month including the cash you spend. Be realistic. Then add it up and subtract it from your income.

(3) If you have a surplus, then you can apply for a credit card or auto loan as long as the minimum payments are less than the surplus amount.

(4) If you have more expenses than income, don’t get any new credit or auto loan. You can’t afford it.

ii. Only get a new credit card or auto loan if you can easily make the minimum payments each month. If you miss payments your credit score will go down instead of up.

iii. Put the card on automatic pay from your checking account for the minimum payment due each month.

iv. When the paper credit card bill comes in, pay as much more as you can by check.

v. Don’t ever max out your credit card.

vi. Borrow less than one half of your credit limit, if possible.

vii. Try to pay the full balance when the bill comes at least once or twice a year.

viii. Only use the credit card for emergencies or to cover short term shortfalls.

ix. Don’t ever apply for a new credit card so you can use it to make payments on another credit card. 

x. Avoid adding family members as authorized users of a credit card as that makes it much more difficult to manage properly.

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Does Bankruptcy Ruin Your Credit

DOES BANKRUPTCY RUIN YOUR CREDIT?

It is a common belief that bankruptcy ruins a consumer's credit, but that's not necessarily true. The fresh start consumers are searching for when they file bankruptcy can apply to their credit too. When a consumer files bankruptcy all of his existing debt should be reported as "discharged in bankruptcy" and "balance -0-." If that actually happens, filing bankruptcy gives the consumer a clean slate. Sure, the bankruptcy is a negative, but its impact on the consumer's credit score will diminish in time. This gives the consumer an opportunity to re-establish their credit fairly quickly--often in six months to a year. Sure, a consumer won't have perfect credit with a bankruptcy on his record but his credit score will often be high enough to get car loan, rent an apartment or even refinance a home at market interest rates.

Unfortunately, this won't happen automatically. Creditors often do not report the bankruptcy to the credit bureaus, Experian, Transunion, and Equifax, correctly which will prevent the credit score from recovering the way it should. This is why is imperative for consumers to monitor their credit after bankruptcy. This can be done with a credit monitoring service or simply by going to AnnualCreditReport.com and doing it themselves.

For our clients it is part of our service. We help them get copies of the credit reports and then review them to be sure the reporting is correct. If it turns out to be wrong we get it corrected and do our best to make the offending creditors pay our fees. Either way, our client's never pay us a dime out of pocket.

For information on how to obtain your credit reports follow this link or, if you would like our assistance in getting a fresh start on your credit, visit our Website.

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Will Filing Bankruptcy Ruin Your Credit?

One of the misconceptions about filing bankruptcy is the belief that it will destroy the filer's credit. The truth is filing bankruptcy often will improve a persons credit and certainly, in the long run, be very beneficial to your credit score. Typically the bankruptcy filer will already have bad credit. Credit cards, medical bills, and installments loans are often behind or the debtor has quit making payments altogether. If nothing is done his credit will not improve for at least 10 years, and often longer since the ten years that adverse credit can remain on a credit report only starts when the customer quits making payments. Bankruptcy, however, often will be the beginning of a healing process. After much of a person's debt has been discharged, the person becomes a much better credit risk and his or her credit score will begin to improve, assuming the person is employed and doesn't run up a bunch of new debt after the bankruptcy.

This improvement in the bankruptcy filer's credit will only happen, however, if the creditors properly report the debtor's credit. Unfortunately, often this isn't the case. It's important to check your credit after bankruptcy to be sure the debt is listed as "discharged in bankruptcy" and a balance of "zero." If this isn't the case not only will the adverse impact of a bankruptcy be on your credit, but also all of your old blemishes that should have been removed. A consumer can dispute adverse credit themselves, but often creditors don't correct the adverse reporting. Your best bet is get professional help in the beginning. This shouldn't cost you any money as the law provides that attorney's fees are recoverable if it becomes necessary to sue a credit to force compliance with the credit laws. Visit our website at http://protectyourfreshstart.com for more information.