You have just received your bankruptcy discharge, and you may be wondering to yourself, now what? How do I go about rebuilding my credit? What steps can I take to improve my credit score? When I researched this topic online virtually all the articles that I read basically emphasized the same thing: Do not incur more debt, pay all your bills on time, and obtain a secured credit card and pay it off in full each month. In fact, here is a good article on this topic Life After Bankruptcy: 5 steps to Rebuilding your Credit, Finances and Emotions, written by Lynnette Khalfani.
There is however one key piece of advice that most news outlets seems to glance over and that is the need to ensure that your credit report is properly reporting your bankruptcy discharge.
All the debt that existed on your credit report on the day you filed your case (regardless whether you were current on the particular obligation, 90 days late, account has been charged off, in collections, etc.) now must be reported by the credit bureaus as “discharged/included in bankruptcy” AND must show a zero balance.
Why is this so important? Because in one of life’s many ironies, a credit report 12 months after a bankruptcy discharge will look better –as in higher credit score- then probably 2/3 of people out there who have not filed for bankruptcy! Why? Because the amount of debt to income ratio, a key component in determining your credit score, looks incredibly good now that you are debt free! Other than student loans, you now have 0 debt, something that not many Americans can say. In addition, the credit score is all about the here and now. It is all about what you have done, or not done, for me lately. As in, a lot more emphasis is placed on the last 12 months of your account activity. And as long as you have not racked up a whole bunch of debt since getting out of bankruptcy things are looking pretty darn good.
So, what you need to do is wait about 60-90 days after the bankruptcy discharge has arrived and then order your credit report from the three major credit bureaus: Transunion, Experian, and Expedia. NOTE: DO NOT ORDER YOUR CREDIT REPORT ONLINE. Then, examine the credit report and make sure that all accounts are now showing “included/discharged in bankruptcy” and showing a “zero balance.” If you would like you can email me your credit report and I will take a look. If one of the accounts is being improperly reported by the credit bureaus then you will need to write a dispute letter to the credit bureau. I can help you with that as well. If that does not get things fixed, then you may have to write one more dispute letter.
Finally, if after a couple of attempts the problem has not been fixed, then you have no choice but to sue them under the Fair Credit Reporting Act. As the name implies, the credit report must be fair in what it depicts and fair means accurate. There is nothing fair or accurate about continuing to report a $5,000.00 credit card balance or showing it as “charged off” or “late” or “in collection” when the debt no longer exists as a result of the bankruptcy discharge. And since asking nicely has not worked, you have no choice but to sue. Notice that the credit bureaus get one or two free bites at the apple…as in, they are not held liable for the initial reporting error, but what gets them is their failure to properly reinvestigate upon being advised of an error.
So forget all the fancy advice out there and start with the basic stuff. Order your credit report and make sure the bankruptcy is properly being reported.