Bankruptcy offers debtors a fresh financial start. Unfortunately, many debtors avoid rebuilding their credit profiles after bankruptcy. These debtors believe that credit is dangerous and should be avoided.
Responsible use of credit is an important part of personal finance. A good credit score is necessary to purchase a house or car, or qualify for a bank loan or credit card. Aside from credit applications, credit scores are also used by employers during the hiring process, by car rentals, and by landlords. In other words, your credit score is important.
The first step to rebuilding your credit after bankruptcy is to examine your credit reports for errors. Many debtors believe that the bankruptcy court reports information to the credit bureaus. It does not. It is your responsibility to ensure that the information in your credit report is accurate.
There are three major players in the credit reporting world: Trans Union, Experian, and Equifax. The federal law mandates that each credit reporting agency must issue a free credit report to a person once a year upon request. To facilitate this directive, Trans Union, Experian, and Equifax have created a consumer website: https://www.annualcreditreport.com. At this site you can obtain an entirely free credit report without a credit card or on-going financial obligation. A copy of your credit bureau credit score is also available for a nominal fee.
Discharged debts should be listed on your report as “included in bankruptcy” with a balance of “zero.” There should be no collection activity listed on your credit report after the filing date of your bankruptcy case. For instance, the addition of a third party collector after the date you filed bankruptcy violates the bankruptcy automatic stay injunction and should be removed from your credit report. Likewise, overdue payments after the filing date are considered collection actions and should be removed.
Cleaning up your credit report is the first step to credit recovery after your bankruptcy case. In many cases, you can improve his credit score to an average score within a year or two after bankruptcy. However, any stumble along the way will only magnify the bankruptcy filing and keep your credit score low. For this reason it is important to monitor your credit report for errors or any changes at least twice a year.