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Rebuilding your credit after bankruptcy

A bankruptcy discharge is the formal order entered at the successful completion of the case.  The discharge is your ticket out of bankruptcy and the beginning of a fresh financial start.

Building and maintaining good credit after bankruptcy is critical to a fresh start. The higher your credit score, the lower your interest rate on credit cards, mortgages and auto loans.

No sooner than 4-months after receiving your discharge, but no later than 9-months after discharge, your first step should be to secure a copy of your credit report to see where you stand. You are entitled to one free credit report per year from Equifax, Experian and TransUnion, and you can get it easily by going to www.annualcreditreport.com or calling 1-877-322-8228.   Beware of other web sites that sound “free,” because they probably require you pay a fee or enroll in a monitoring service at a cost.  The only service that I’m aware of that’s absolutely free (no strings attached) is www.annualcreditreport.com.

Once you get your report, check it for accuracy: you will be surprised how often mistakes show up.  The bankruptcy case should say “Discharged” (not “Dismissed”).  Each account that was discharged should say “Discharged in Bankruptcy.”  Conversely, any account that was reaffirmed should say “Account in Good Standing” if you’re current.  Verify that each creditor listed is actually one you either use or have used in the past, and dispute any errors – including old or outdated addresses.

Tips to rebuilding and maintaining good credit

  • Open a checking or savings account. Having a financial history will help you secure a loan.
  • Pay your reaffirmed or post-bankruptcy bills on time; take advantage of auto-pay to avoid late-fees.
  • Keep balances as low as possible on “revolving credit” (i.e., credit cards).
  • When possible, pay off debt instead of transferring it to low-interest rate cards.
  • Don’t open lines of credit you don’t need.
  • Protecting your credit from identity theft is another pro-active way of maintaining good credit; if your identity is stolen and fraudulent charges appear, it will take some time to straighten it all out.

Tips on protecting your credit

  • Guard your mail from theft by shredding it before discarding it – especially mail containing personal information, including charge receipts, credit offers and applications, insurance forms, doctor’s statements, discarded bank checks and statements, and expired credit cards.
  • Be protective of your personal information.
  • Be cautious when giving out your credit card number, address, or other personal information. When possible, only share this information with reputable organizations.
  • Never carry your Social Security card. Leave it in a secure place at home or in a safe deposit box if you have one.
  • Use secure online purchases (https://) whenever possible, and look for graphic images of a lock and key at the bottom corner of your browser or the words Secure Sockets Layer (SSL).
  • Avoid using your card as identification. Thieves can use this information to assume your identity and open bank accounts, make purchases – even get a job or apartment using your identity. Only use your credit card at recognized and reputable merchants.
  • If you suspect fraud, contact the bank that issued your card and have them put a “credit freeze” on your account. A credit freeze will flag your account and make it difficult for would-be-thieves to open a new line of credit under your name.

Tips if you are a victim of identity theft and fraud

  • If you suspect fraud, the first thing to do is place a Fraud Alert on your credit file. This alert will stay in place for 90 days and will require creditors to verify your identity before issuing credit in your name.
  • If you have already been a victim of fraud, fill out an Identity Complaint Form with the FTC and have them place an extended fraud alert on your credit file which requires all creditors to actually speak with you before issuing credit. The extended fraud alert stays on your file for 7 years.
  • Repairing your credit will take time. It’s similar to building your credit from scratch – but more challenging since the blemishes from the past will be on your file for a while.

Tips on improving or repairing your credit

  • Pay your bills on time. The length of time you’ve paid your bills timely impacts your credit score.
  • Get current on all your accounts. If you are behind, creditors will send your accounts to collectors and this will negatively impact your credit file.
  • If you fall behind on payments, contact the creditors or see a credit counselor and let them know your situation. This will give you a chance to work something out with the creditors – possibly delaying reports of delinquencies to the credit agencies.
  • Get your credit report a few times a year to monitor your progress. Although it takes time to raise those scores, watching them rise should serve as motivation to reinforce these new habits.

Disputing Errors on your Credit Report

If your credit report does not accurately reflect accounts discharged in bankruptcy, or other material information, it’s important to send a dispute letter to all 3 bureaus ASAP.   Under the Fair Credit Reporting Act (FCRA), the credit bureau is required by law to correct any disputed items within 30-days.  Here’s a sample dispute letter:

Date Your Name Your Address Your City, State, Zip CodeComplaint Department Name of Credit Bureau Address City, State, Zip Code

Dear Sir or Madam:I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,

Your name

Enclosures: (List what you are enclosing)

Brian Cahn, senior partner with Perrotta, Cahn and Prieto, P.C.

Perrotta, Cahn & Prieto represents clients throughout Georgia and the Southeastern United States.  We have offices conveniently located throughout Georgia.  To schedule a free consultation with a lawyer at our firm, call us toll-free at 866-382-8900 or visit us online at www.northgabankruptcy.com.

We have offices in: Cartersville, Calhoun, Dalton, Atlanta and Dallas

Serving clients in: Bartow, Floyd, Paulding, Cherokee, Polk, Whitfield, Douglas, Cobb, Fulton, Chatham, and all of Northwest Georgia.

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