This morning, I met with one of my former bankruptcy clients who wanted to discuss credit restoration. I thought it might be relevant to this blog to discuss what we found on her credit report and what I advised her to do.
My client brought me a copy of her Equifax report for review. The credit report showed that most of the debts included in her Chapter 7 had the indicia “included in bankruptcy” with a zero balance and no reference to any late pays. So, it appears that in most cases, bankruptcy has the effect of wiping out credit report references to outstanding debt as well as references to late pays. This is important because late pays are a major cause of credit damage. I was actually somewhat surprised to see that the late pays were deleted.
There was one account that we had included in the Chapter 7 that was still showing as an outstanding debt. This is obviously a mistake and I drafted a “challenge letter” disputing this account balance and the associated late pay.
There was one account that had the “included in bankruptcy” indicia but had the late pay information. I drafted a “challenge letter” disputing the late pays.
There were three student loans that had late pay references. There was one 60 day late and two 30 day late pays. I encouraged my client to make every effort to tender all student loan payments timely. I also drafted a “challenge letter” disputing the late pays.
My client wanted to know what she could do to re-establish credit. I suggested that she look into getting a gasoline credit card or a department store card. Unsecured credit that is properly managed is the quickest way to improve one’s credit score.
Finally, I noted to my client that we only had the Equifax report on hand and that she needed to request credit reports from Experian and Trans Union.
My client advised me that she and her husband hoped to be able to qualify for a house within the next year. I suggested that she contact a mortgage broker for more information about rates and credit scores in the current market.
Interestingly, my client advised me that her husband, who did not file bankruptcy, but participated in a payment plan with his creditors, actually had a lower credit score than she (the bankruptcy client) had. Interesting.
The bottom line is that we found one definite error and several areas ripe for challenge. I hope and expect that we can increase her credit score by 100 points within the next few months.
I will update this blog entry as we see what effect the challenge letters and my advice will have.
–Jonathan