You might be surprised to learn that credit reports often have errors, and that mistakes on your credit report can lower your credit rating and make it hard to get loans.
Filing for bankruptcy provides, legally speaking, a fresh financial start.
It discharges many debts and gives you time to reorganize your financial life.
The problem is that financial companies often do not update credit reports with accurate information from the bankruptcy.
This means that incorrect information can stay on your credit report for a long timeand prevent you from rebuilding your credit.
How does the credit report system work?
The credit report system relies on the creditors themselves to update each account you have.
The creditors are supposed to send an update each month about what, if anything happened with each of your accounts.
Usually these updates will be things like:
- “Paid on time”
- “Paid late”
- “Account closed at borrower’s request”
WHY THERE ARE OFTEN CREDIT REPORT ERRORS AFTER FILING BANKRUPTCY?
After the Chapter 7 bankruptcy or Chapter 13 bankruptcy, each creditor is supposed to tell each of the three credit bureaus that the loan was “included in bankruptcy.”
However:
- The bankruptcy court does not make sure your credit report gets updated
- Bankruptcy attorneys are not authorized by the lenders or credit bureaus to submit information to that effect
This is why there can be mistakes on your credit report.
How does this happen?
Sounds simple, right? But the fact of the matter is that many accounts do not get updated to say included in bankruptcy.
This could be because:
- The account was moving between collection agencies and creditors
- There was a computer error at the credit bureau
I am not sure about the underlying reasons, but I have observed that many accounts are not correctly updated after bankruptcy.
One reason why there may be errors is because of the sheer volume of changes to a credit report that a bankruptcy requires.
Every account should be changed to show that there was a bankruptcy, but inevitably a few slip through the cracks.
WHAT CAN I DO TO FIX IT?
The best way to check for mistakes on your credit report after bankruptcy is to request a free credit report from each of the three credit bureaus: Experian, Equifax, and Transunion.
Here’s what you need to do:
- Go to www.annualcreditreport.com
- Request each of the bureaus
- Dispute each entry that isn’t marked as included in bankruptcy or discharged in bankruptcy
Each credit bureau has a dispute process that you can follow on their websites, and make sure to include a copy of your bankruptcy discharge order as your documentation when you make these disputes.
For more details on the dispute process, please visit the Federal Trade Commission’s website.
WHAT SHOULD I LOOK FOR?
The particularly dangerous entries are the ones where the lender is still marking you as delinquent after bankruptcy.
When this happens, you get a new negative entry every month, so look out for anything marked with a late or missed payment after the bankruptcy.
Why are negative entries bad?
Negative entries are the most important ones to dispute because they can continue to drag down your credit rating for years.
Negative entries generally stay on your credit report for 7 years, so if a discharged debt marks itself as delinquent every month, then it will never go off of your credit report.
Getting it marked as included in bankruptcy, however, only happens once, so you will start the clock running on when the negative entry will be removed.
Conclusion
If you need help making sense of the mistakes on your credit report, then we can help you.
Contact Us at 612.824.4357 and tell us what you need us to do.
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