When you use bankruptcy to get out of debt, the first thing you’re going to want is to work on your credit score. Getting your credit into tip-top shape, after all, helps put you in the best light with new lenders.
That’s where credit repair companies come in.
They play on your fears that bad credit will stand in the way of your dreams, and that bankruptcy is the end of the world. Once you’re hooked, they promise to remove bad marks from your credit report.
Their promises sound too good to be true – and that’s exactly what it is.
Your Credit Score After Bankruptcy
After bankruptcy, you don’t owe money to anyone. You also don’t have any open accounts you can use. Finally, you can’t wipe out your debts in a new bankruptcy right away.
Looking at those three factors together, you’re a better credit risk after bankruptcy than you were before you went into the process.
But your score won’t go up if your credit report is incorrect.
How Credit Repair Companies Work
Credit reporting laws give you the right to request investigation of incorrect information. Those rights don’t extend to removing information you don’t want to show up.
Credit repair companies, however, dispute all bad marks on your credit report.
Credit reporting agencies pass those disputes to the creditors for verification. The information gets updated if it’s verified, and removed otherwise.
If the debt gets deleted then the credit repair company declares victory. If not, the company sends out another dispute next month.
This process gets repeated until your report is clean, which raises your credit score. Unfortunately, this tactic works only for a short period of time.
Creditors usually update their reporting information every few months, by uploading a complete set of data to the credit reporting agency. If the creditor failed to verify the debt or the credit reporting agency didn’t pass along the dispute, your old account will be uploaded to the system once again.
When that happens, the bad marks will reappear. But the repair folks hope you don’t check your reports so you won’t realize what they’ve done until it’s too late.
In sum, remember this. Any company claiming it can delete accurate information on your credit report is lying to you.
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Don’t Get Scammed – Check Your Credit Reports
About four (4) months after bankruptcy, go to AnnualCreditReport.com to get copies of all three (3) of your credit reports.
If you can’t get the free reports, go to Experian and get their All-In-One 3-Bureau Report that will also include information from Equifax and TransUnion.
A few pointers:
- Don’t try to start your credit repair after bankruptcy immediately. Each creditor and debt collector updates credit information, but some do so every 90 or 120 days. It’s best to wait a few months before you check your reports.
- AnnualCreditReport.com is the official way to get a free copy of your credit report each year.
- Make sure you get all three credit reports because each one contains different information. A lender may access any one of the reports when making a decision on whether to extend you new credit. You should check them all for your protection.
Review Each Credit Report
Once your bankruptcy case ends, the federal Federal Trade Commission says that all debts need to be updated to show a $0 balance due.
Reporting the debt any other way is inaccurate under federal law. Debts charged off before bankruptcy may also show that information.
You should look at each tradeline on every credit report to ensure that the debt is showing as having $0 due.
If there’s an inaccuracy, send a dispute to the credit reporting agency. Be clear about which account is imcorrect, and send proof of the bankruptcy discharge.
Send the letter by certified mail. Keep a copy of the original signed letter and the certified mail receipt card.
Wait For Updated Reports
The credit reporting agency has to respond to your dispute. That usually comes in 30-60 days, but it could be a longer or shorter.
Be sure to review the repsonse and double-check your updated reports for accuracy.
If it is, congratulations – your journey of credit repair after bankruptcy is complete. Check your credit reports every six months to make sure none of the errors resurface, but aside from that you’re all set.
You have now saved yourself a lot of money and time because you did it without hiring a credit repair company.
If You Don’t Understand The Reports Or If Errors Persist
You may not be able to resolve your credit report errors problems immediately.
You may not understand what the credit reports say.
There are plenty of lawyers who can explain your credit report to you. Other consultants may be able to help you understand what your credit report says.
If the errors continue to show up then talk with a lawyer about your rights to an accurate credit report. Together you can set a plan in motion to make sure your reports are corrected once and for all.