After bankruptcy: Keep watching your credit report
Ken and Mary filed bankruptcy with me three and a half years ago. They had built back to a credit score in the high six hundreds.
Until last week. Last week, Bank of America “updated” their credit report, replacing “bankruptcy” in 2008 with foreclosure, January 2012. Ken first noticed this on Experian, but when I had him check, it also showed up on Trans Union and Equifax. That wrecked their good credit.
We’re working with Ken right now to send letters to each of the three credit bureaus (with copies to Bank of America) asking them to fix it.
If asking nicely doesn’t work, we’ll sue. (Under the Fair Credit Reporting Act, you usually have to do a dispute letter, or even two, before you can sue the creditor or credit bureau. In fact, under the law, you really don’t have the right to get a correction on your credit report. You only have a right to a“reinvestigation.” If your disputes don’t get it fixed, you have to sue–not because it’s wrong, but because they didn’t investigate.)
We sue credit bureaus half a dozen times each month or more. We sue to make sure that our clients’ bankruptcies are properly reported. It seems strange to some people that we sue in order to get bankruptcy on people’s credit reports. That’s because some people still think that bankruptcy is the worst thing you can have on your credit report. That’s totally wrong.
As Ken told me, updating bankruptcy to foreclosure “killed my credit score.” It’s a whole lot easier to build back to good credit after bankruptcy than it is to build back after a foreclosure. Why? Because bankruptcy means you don’t still owe the money. Foreclosure means you still do. Nobody wants to lend you money at a fair price on a new car or new house if there’s an old foreclosure out there that can garnish you.
People who lend you money want to know two things–can you pay, and do you. If you have a foreclosure sitting there, it tells potential lenders that you don’t pay (that’s the foreclosure) and you can’t pay–because you are still in danger of getting garnished.
When you file bankruptcy, that “can’t pay” changes to “can pay.” That’s because they know you don’t owe anybody any money. Then if you get some low balance credit cards, charge a little every month, and pay them every month, now you have “can pay,” and “does pay.”
That’s why it’s so important after your bankruptcy to make sure all those charge offs, lates and foreclosures are all updated to show bankruptcy. Only a handful of lawyers in the country do that. I’m one.