At the conclusion of this lesson you should be able to:
1. Identify critical documents from your Chapter 7 Bankruptcy filing.
2. Identify critical elements of your past credit history and understand how they affect your current credit status.
3. Understand the steps you need to take to re-establish your credit-worthy status.

This lesson will help you identify critical documents from your Chapter 7 Bankruptcy, especially documents which you must keep for your records. You will also be able to identify critical elements of your past credit history and understand how they affect your current credit status. Finally you will learn the steps you need to take to re-establish your credit.

INTRODUCTION

You’re probably wondering if you will ever get credit once you’ve been discharged in your Chapter 7 Bankruptcy. Perhaps you worry how you can get a car loan or buy a home. Remember, you won’t necessarily be rejected for new credit by a lender just because your credit report shows that you filed a Chapter 7 Bankruptcy.

Creditors use their own underwriting guidelines to decide whether or not to give you credit, and they all differ. The loan officer uses these guidelines and your credit report when reviewing your credit application. Your credit file is a record of your past payment history. Suits, collections, attachments, and bankruptcies all show up on your credit report and are all indications — in one degree or another — of credit problems.

THE PAST: CHAPTER 7 AND HOW IT AFFECTS YOUR CREDIT FUTURE

Because you have filed Chapter 7, you need to take an active role in managing your personal credit record for the next few years. Even if you don’t believe that you want credit now or in the future, you may find that you need to finance a large purchase, take a long trip, rent a car or travel to another country, rent a hotel room on credit, or finance a small business. If you are like most people, you will probably need credit for one of these or some other reason in the future. Therefore, it is important to be sure that your credit history is reflected accurately on your credit report, and that you do as much as you can now to start rebuilding your credit-worthiness.

Keep All Records From Your Chapter 7 Bankruptcy Filing & Know What Documents You Need To Keep

Do you have these important Chapter 7 documents?
Petition, Motions, Schedules, Orders, Matrix, Amendments

If not, get copies now and keep them in your permanent files for a long time, maybe forever! It is important that you keep your Discharge Order.

THE PRESENT: YOUR CREDIT REPORT

HOW TO GET YOUR CREDIT REPORT

Your credit report is a very important document which influences many different parts of your life — now and in the future. It shows how you have paid your debts in the past as well as other information that is reviewed by a lender in deciding whether or not to grant you credit. Your credit report is also reviewed by potential employers in deciding whether or not to offer you a job, by utility companies in deciding how much to charge you for service, and even by landlords in deciding whether to allow you to rent a home or apartment. It is additionally used by some insurance companies in deciding whether or not to extend coverage to you.

You may have more than one credit report. Lenders who you have borrowed money from in the past usually report your repayment history to more than one credit bureau. This means that your records might be on file with several credit bureaus. A good deal of other information about you besides your borrowing and repayment history is shown in your credit report — like your social security number, your past and present addresses, employers, and even information about your spouse.

There are three major credit reporting agencies in the United States called “credit repositories.” Each of the “Big Three” repositories has an 800 number so that you can call to get information about ordering your own credit report. The “Big Three” credit bureaus cover the entire country. There may also be smaller credit bureaus in your area who maintain credit files of information about you as well. These are the “Big Three” credit repositories:

• Trans Union, also known as TU (1-800-888-4213)
• Equifax, also known as CSC (1-800-685-1111)
• Experian, formerly known as TRW (1-888-397-3742)

Under the Fair Credit Reporting Act (“FCRA”) you have the right to know what is in your credit file. If you have been denied credit within the past sixty days, you can find out what is in your credit file for free. If a creditor declines your application for credit based on the information obtained from your credit bureau file, they are required to tell you the name and location of the credit bureau from which they obtained your file. If you are turned down for a loan, for insurance, by an employer, or if you suffer any other adverse circumstances, call each credit repository. Tell them you have been denied credit and ask for a copy of your credit report.

You may also qualify for a free copy of your credit report if you are receiving welfare, if you are unemployed and plan to seek employment within the next 60 days, or if your credit report is inaccurate due to fraud.

If you have not been denied credit recently or do not qualify for a free report for one of the above reasons, you should still order a copy of your credit report so that you can review all of the information it contains about you and correct any inaccuracies as quickly as possible.

WHAT CREDIT REPORTS SAY ABOUT YOU AND YOUR PAYMENT HABITS

Credit reports from different credit repositories do not look the same because each credit reporting agency designs its own report. Therefore, they are often difficult to read and understand. However, the FCRA requires that each repository provide instructions at the beginning of the report about how to interpret the information.

There are some credit reporting characteristics that you will find in each repository’s reports. For example, all credit reports contain the following information:

Personal information about you
• Name — past, present, and aliases. (Watch out if you are a Sr., Jr., III, etc.; if you have a very common name; or if someone in your family has a name similar to yours. Make sure that the person described in the report is you. Check the following information carefully as you may have someone else’s information in
your file.)
• Address — past and present.
• Phone number
• Social Security Number
• Date of birth
• Employment information

Account information
• Name and type of creditor
• Account number
• Whether the account is individual or joint
• Date opened
• Type of account — installment or revolving
• Date of last activity
• Highest amount of credit used and current limit
• Number of late payments (noted in 30-day increments)
• Current balances
• Number of open accounts
• Comments, such as “Included in Bankruptcy,” “Making Regular Payments Under Wage Earner Plan,” “Account Charged Off…”
• Date the information was verified
• Consumer’s Comments

Collection Accounts
Accounts sent to collection agencies for collection.

Courthouse and Public Records
Tax liens, foreclosures, repossessions, bankruptcies, and judgments.

Additional Information
Legal items of public record, such as marriages, arrests, etc.

Disputed Items
These are items in your file that you dispute with the credit grantor.

Credit Report Inquiries
Made by you, by creditors, or by others during the past 12 months or made by an employer during the past 24 months.

WHY GET A CREDIT REPORT?

It is a good idea to order a copy of your credit report and review it before you actually apply for a loan, for insurance, to rent a home, to set up utility service, or to seek employment. If you wait until a loan officer orders one for a loan application for instance, it may be too late to dispute any inaccurate information contained in the report.

Here’s why you should review your credit report before you apply for credit, for a job, or for insurance:

• It may contain someone else’s information.
• It may show an incorrect balance.
• It may contain other inaccurate information that needs investigation.
• If you find incorrect information, you may wish to dispute it with the credit bureau.
• If your dispute is not resolved, you may wish to add a brief statement describing why you disagree with the information in your report.

WHAT TO LOOK FOR ON YOUR CREDIT REPORT

After you request your credit report — and be sure to request your reports from each of the Big Three repositories — allow 7 to 21 days to receive it. After you receive all of your reports, it is a good idea to follow these steps:

1. Determine the date all account information was reported.
2. Verify the current status of the accounts. Once a debt is discharged, verify that the credit report indicates a discharged status. It is important to note that payment history on a discharged account should also be removed.
3. Verify that all accounts that were discharged by your bankruptcy plan show a zero balance.
4. If there is a written comment about bankruptcy on any creditor entry, it should show that the debt was included in a Chapter 7 Bankruptcy.

WHAT IS DEROGATORY (NEGATIVE) INFORMATION?

Lenders, employers, insurers, and others may deny your application if derogatory information appears on your credit report. Derogatory information may be any one or more of the following statements:

• Paid, collection
• Paid, charge-off
• Paid was 60, 90, or 120 days late
• Charge-off
• Collection account
• Delinquent
• Current, was 60, 90, or 120 days late
• Account closed—grantors request
• SCNL (subscriber cannot locate)
• Bankruptcy—Chapter 7
• Tax liens
• Judgments
• Excessive Inquiries
• Checkpoint, Trans Alert or Caution (potential fraud indicators)

HOW WILL DEROGATORY INFORMATION AFFECT YOU?

Negative information on a credit report is any information that may cause you to be turned down for credit or reduce your chances for loan approval.
• Most negative information legally can be reported on your report for seven years.
• Bankruptcies may be reported for up to ten years.
• Chapter 7 Bankruptcy is reported for ten years from the date of filing.
• Tax liens remain on your record for seven years after the date they were paid.
• Some judgments may be reported for ten years. Judgments may also be renewed.

HOW TO DISPUTE INFORMATION ON YOUR REPORT

Your credit report is the history of your past performance with creditors. Therefore, if the information reported in your report is inaccurate or out of date, the information must be corrected or removed.

It is important for you to report any inaccurate information that you find on your credit report right away. Credit bureaus are required to investigate and correct inaccurate information within 30 to 45 days from receipt of the dispute. If they cannot verify the information you are disputing, they must remove it from your file and upon your request, notify anyone you specify who has received the inaccurate file within the last 24 months for employment and 6 months for any other
reason.

Any credit bureau that willfully fails to comply with these and other FCRA provisions with respect to any consumer is generally liable to that consumer in an amount equal to the sum of:

• Actual damage sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000
• Any punitive damages that the court allows
• The cost of the action together with reasonable attorney’s fees as determined by the court in the case of any successful action to enforce any liability under this section

HOW TO DISPUTE INACCURACIES ON YOUR REPORT

1. Know your rights under the FCRA, the Consumer Credit Protection Act, and the Fair Debt Collection Practices Act. For free information explaining these laws and to receive pamphlets such as Building a Better Credit Record, Women and Credit Histories, and Credit Billing Blues, write to:

Federal Trade Commission
Public Reference
Washington, DC 20580
(http://www.ftc.gov/bcp/conline/edcams/credit/coninfo_loans.htm) .

2. After examining your credit report, write a letter to each of the credit repositories requesting that disputed information in the report be investigated.

3. Keep a record of all letters requesting updates and keep any other correspondence related to your credit report.

4. Follow up if corrected reports are not received after the bureau reinvestigates and determines that the information you disputed is incorrect or cannot be verified. If the reinvestigation by the bureau does not resolve your dispute, you may contact one of the following federal agencies which have the authority to enforce the FCRA:

• Credit Reporting Agencies
    Federal Trade Commission
    Consumer Response Center — FCRA
    Washington, DC 20580
    Telephone: 1-877-FTC-HELP (382-4357)

• National Banks, federal branches/agencies of foreign banks, (the word “National” or initials “N.A.” appear in or after bank’s name)
    Office of the Comptroller of the Currency
    Compliance Management, Mail Stop 6-6
    Washington, DC 20219
    Telephone: (800) 613-6743

• Federal Reserve System member banks (except national banks, and federal branches/agencies of foreign banks)
    Federal Reserve Board
    Division of Consumer & Community Affairs
    Washington, DC 20551

    Office of Thrift Supervision
    Consumer Programs
    Washington, DC 20552
    Telephone (800) 842-6929

• Federal Credit Unions (words “Federal Credit Union” appear in institution’s name)
    National Credit Union Administration
    1775 Duke Street
    Washington, DC 22314
    Telephone: (703) 518-6300

• State-chartered banks that are not members of the Federal Reserve System
    Federal Deposit Insurance Corporation
    Division of Compliance & Consumer Affairs
    Washington, DC 20429
    Telephone: 1-877-ASK-FDIC (1-877-275-3342)

• Air, surface, or rail common carriers regulated by former Civil Aeronautics
    Board or Interstate Commerce Commission
    Department of Transportation
    Office of Financial Management
    Washington, DC 20590
    Telephone (202) 366-4000

• Activities subject to the Packers and Stockyards Act 1921
    Department of Agriculture
    Office of Deputy Administrator — GIPSA
    Washington, DC 20250
    Telephone (202) 720-7051

A SPECIAL NOTE ABOUT “CREDIT REPAIR”

There are businesses that advertise that they can “remove unfavorable remarks” and “clean up your credit report” based on loopholes in federal law. These businesses or “clinics” often tie up your file at the bureaus by flooding them with requests for verification of derogatory information even if it’s true. What they don’t tell you is that the information they removed from your report can be replaced at a later date if the creditor who is reporting that information can verify that it was accurate.

Remember that only the creditor or credit reporting agency can legally remove that information from your file before the seven-to-ten year reporting period expires. And they will only remove information reported in error.

THE FUTURE: REBUILDING YOUR CREDIT WORTHINESS

THE LENDER’S POINT OF VIEW

Lenders often evaluate you to determine how much credit to grant you — if any — based on the “three C’s: character, capacity, and capital.”

• Character — Will you repay? Lenders may consider factors such as the length of time you have been at your present and previous address, time at your present/
previous job, references, and credit history.

• Capacity — Can you repay? The lender may consider income from all verifiable sources and the reliability of your job, debt to income ratio, or how your monthly income compares to your monthly debts.

Some creditors prefer that no more than 28% of your gross income if employed or of your net income if self-employed pays for housing debt. In addition, the maximum overall “fixed” debt (including housing) is 36% of your gross income if employed or of your net income if self-employed

• Capital —What collateral do you own? Lenders will ask you to disclose all real estate you own, the amount of cash you have in checking and savings accounts, other investments, and any other personal property you own.

WHAT IS CREDIT SCORING?

Credit scoring is another method that some lenders use to determine whether you meet their lending criteria. Credit scoring is done by computer. It is a statistical method used to evaluate your payment history and other factors.

The lender’s underwriting guidelines assign a specific score to various elements of your loan application, such as your ratios, the down payment you put to the loan, number of credit cards you have, your payment history to other creditors, etc. They then calculate an overall score based on all of the above. If your score is high enough, they will grant you credit. If not, then they may not grant you credit.

WHAT STEPS SHOULD YOU TAKE TO UPDATE YOUR CREDIT HISTORY?

After you have gone through the process of ordering your credit report and correcting any incorrect information, you will need to focus on rebuilding your credit history. You’ll need to update your existing file and start working toward establishing a strong, new credit history that proves you have changed poor repayment habits, if those were in fact part of your old history.

• Supply the credit bureau with any positive information which may not appear on your report.
• Make sure the status of all accounts on the report is accurately reflected.
• Close any open accounts you’re not using.
• Work with your creditors to delete derogatory information that is not yours.
• Clear up any erroneous student loan matters.
• Clear up any incorrect public record information.

WHAT YOU CAN DO TO REBUILD YOUR CREDIT AND IMPROVE YOUR SCORE

• Open a checking and savings account and begin making regular deposits even if they are small.
• Apply for a department store or gas credit card (easier to qualify for) and pay all your bills on time, including your utilities.
• If you feel you need a credit card for identification, for travel, or for emergencies, take out a secured credit card by depositing money with the issuing bank and
make charges that you pay on time (interest is generally 7-23% and some cards have no annual fee).
• If you need to buy a car, put down a high down payment and select the most economical car that fits your needs (not your wants) at a low price.
• If you are married, it is a good idea for each spouses to establish their own, separate credit history. The Equal Credit Opportunity Act requires that if you have had a joint account, you can request a creditor to report your individual participation and performance on that account separately.
• In the future, do not go overboard with credit. You could be turned down for new credit if you already have too much revolving credit.

CONCLUSION

Going forward, make a commitment to yourself to pay your bills on time. Late payments not only cost you money you could be spending on other things, they also ruin your credit report. If you must use credit, limit it to what you can pay back in a short period of time. Know what you can really, comfortably afford to pay for purchases with the income you have, and limit your borrowing to that amount.

Keep your borrowing to just a few lines of credit. If you can’t resist temptation, cut up all the cards and close down all lines of credit. Most of all, take advantage of this fresh start. Save money. When you need credit, learn how to shop for it. Make a spending plan and follow it. Don’t be distracted by someone else’s plan for your money.

Take control of your own future.

Your Rights Under The FCRA >>



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