Download Post-Discharge Tips to Rebuilding Your Credit Provided to you by

Post-Discharge Tips to Rebuilding Your Credit
Provided to you by Klarides and Kaplan, LLC
Bankruptcy is no more harmful to your credit record than the financial circumstances that lead to
the bankruptcy filing. Most consumers who file bankruptcy, even those who have never missed
a payment, couldn't get new credit from a lender who truly looked at their financial condition. So
the fact that there are no negatives on their credit report is only marginally meaningful when
looking at the whole picture.
Bankruptcy at least makes all the debt shown in the negative history unenforceable. A debtor is
a far better credit risk after bankruptcy than before.
Remember that a bankruptcy is not going to erase the record of your debts listed in your
bankruptcy. Credit reporting agencies are within their rights in showing accurate history about
your financial affairs. You want to make sure that the bankruptcy discharge also shows on the
credit report so that creditors understand that those old creditors have no legal claim remaining.
Credit reports after bankruptcy
A credit report is a history. Under federal law, you are entitled to an accurate history, but not to
a rewriting of truthful history. That history can properly include delinquencies or bankruptcy.
A bankruptcy discharge will not erase discharged creditors or your pre bankruptcy payment
history. After a bankruptcy discharge, the amount outstanding for each discharged account
should be shown as zero.
Your bankruptcy can be reported on your credit report for 7-10 years from the filing of the case.
Nevertheless, assuming you have income, you should be more credit worthy after a bankruptcy
than you were before, since your old debts no longer have a claim on your future income.
After the discharge, you are entitled under federal law to have the balance of each discharged
debt reported as zero. The history of delinquencies can be reported, but the balance must be
zero to reflect the fact that the consumer is no longer liable for the discharged debt.
Negative history on your credit report is just that, history. It does not doom you to perpetual
credit rejection. It does challenge you to strengthen your financial present by saving and using
credit carefully.
Immediately After Bankruptcy
Step One: Review your credit report
Immediately after you receive your discharge, review and correct your credit report from each of
the three major credit reporting agencies, Equifax, Experian and TransUnion.
Consumers are entitled to a free credit report annually from each of the major reporting
agencies. You can get your reports once a year for free from the government-run
AnnualCreditReport.com; you can buy subsequent copies directly from the bureaus or from
myFICO.com.
Step Two: Dispute Discrepancies
All accounts prior to your discharge indicate that the account was “discharged” and the balance
is “0.” If any of your credit reports show any of your accounts as anything other than the
aforementioned, you need to dispute the reporting of the account with the credit reporting
agency.
How to dispute:
1. Locate Schedule F in the packet containing your Petition and Schedules.
2. Locate each creditor on each of your three credit reports.
3. If the account is not listed as discharged with a balance of zero, go through that
agency’s dispute resolution process. Each of the bureaus offers dispute resolution
online, by telephone and via mail. You can get more information on the dispute process
on the Web sites of the credit bureaus, Equifax, Experian and TransUnion.
4. Finally, keep on top of the credit bureaus to make sure they follow through and remove
the objectionable items.
Step Three: Get a major credit card.
Although retail cards and gas cards can help you build your credit history initially, to get your
scores into 700-plus territory you'll want at least one major credit card: Visa, MasterCard,
Discover or American Express.
Ideally, you want to try to obtain an unsecured credit card. An unsecured credit card is a regular
credit card, so you don't have to deposit any money in order to get it.
If you can't qualify for a regular card, consider a secured version, for which you make a deposit
with an issuing bank. This is a card backed by a deposit you have to make, with a credit limit
that is tied to the amount of your deposit. An example would be if you put $500 into an account
and received a line of credit for $500. Watch out, though. Some issuers of these cards prey on
people desperate for credit, charging extremely high fees that eat up some or all of your
available credit.
1. Use the card each month and pay it off in full. In the case of the passport loan, just pay it
off.
2. Every six months, call your bank and apply for a credit limit raise.
3. Let time pass. A few months after your first limit increase is approved, apply for another
card with a major retailer.
Other tips to rebuilding credit
1. Open up a savings account if you don't already have one.
Even if you can only begin with $100, it can add 30-40 points onto your credit
score.
2. Pay your bills on time.
Approximately 35% of your FICO score is base on payment history. The more
frequent you pay your bills on time, the more your score will rise.
3. Give your limits a wide berth and pay down and spread out your debt.
More than a third of your FICO score depends on how much of your available
credit you're using -- your so-called credit utilization. Keeping your credit
utilization below 30% on your cards is good; getting it below 10% is even better.
If you regularly use more, ask for a higher limit, spread your charges out on more
than one card or make two payments every month -- one just before your
monthly statement closing date to lower the balance reported to the credit
bureaus and a second one just before the due date to avoid late fees.
4. Don't let your cards gather dust.
Overloading your cards is a bad thing for your scores, but so is not using them at
all. The scoring formula prefers to see accounts that are being actively used
rather than sitting on a shelf. Even a little activity is better than no activity.
5. Don't open a lot of new credit card accounts.
This may seem like a good idea, but financial institutions look at it differently. It
sets off all sorts of red flags.
6. Arrange automatic payments for every card or loan.
Credit scores are extraordinarily sensitive to whether you pay your bills on time,
so don't let travel, a busy schedule or a simple brain cramp trash your scores.
7. Push back against lower limits.
Credit card issuers are reducing limits right and left. This can be awful news for
your credit scores, but you can, and should, try to push back. If you can't get the
issuer to reverse its decision, try to move your balance elsewhere.
8. Don't close accounts or let them be closed.
Closing accounts can't help your scores and might hurt them. Yet many issuers
these days are slamming shut inactive cards rather than continue to carry these
unprofitable accounts. If you've got cards you haven't used in a while, take use it
and pay the balance promptly.
9. Apply for credit sparingly.
Applications for credit don't ding your scores as much as some people fear;
typically, you lose five points or less. But when every point counts, such as when
you're in the market for a mortgage or a car loan, you don't want to squander any
of your scores.
10. Patrol your credit reports.
Your credit scores are based entirely on the information in your credit reports on
file at the big three credit bureaus. If the information is wrong, your credit scores
could suffer. Dispute any serious errors, such as:
 Accounts that aren't yours.
 Reports of late payments when you paid on time.
 Bankruptcies older than 10 years or accounts that were wiped out in
bankruptcy but are listed as still due.
 Other negative information that's older than seven years. (The seven-year
clock typically starts 180 days after the account first went delinquent.)