Credit Report After Bankruptcy

27 May Credit Report After Bankruptcy

Iwas recently surprised to hear from a 2008 client who was just denied a $4,000 loan for a new roof by a credit union. The reason was not having any post-bankruptcy credit on her credit report.

She and I had agreed that it did not make sense to incur unnecessary debt after her bankruptcy and then pay it off solely for credit reporting reasons. I always give that advice because the largest factor in credit scoring is the passage of time after the last negative entry, the bankruptcy. She did not want to risk incurring debt she might not be able to repay due to unforeseen future circumstances.

Her credit union apparently went beyond her credit score and – gasp! -actually looked at her history. That’s a good thing, but it’s only halfway. The rest of her analysis should have looked at her long-term and stable state employment, and her very reasonable debt-to-income ratio.

What to do?

Credit reports must be accurate. Balances owed, including retained mortgages and car loans, must be reported as “zero owed, discharged in bankruptcy“. But the balance and the payment history are two different things.

I advised her to get a payment history from her mortgage lender to show the credit union that she was responsibly paying despite the bankruptcy. Oddly, the credit union did not ask for that.

I then advised her on how to dispute the absence of her payment history on her credit reports. Remember, those reports must be accurate. They contain payment history information as well as balance owed information.

The dispute should lead to an accurate report of her payment history, either the easy way by the creditor not responding to the dispute or by a, ah, confrontation with the misreporting creditor.

All in all, a good day’s work and a happy client.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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