Bankruptcy, Foreclosure, & Credit – Part II

This article is a continuation of “Bankruptcy, Foreclosure & Credit – Part I,” answering commonly asked questions about these topics.

Where do I Get a Copy of My Credit Report?

There are three major “credit bureaus” that keep a file of your credit history.

EQUIFAX
Post Office Box 105252
Atlanta, GA 30374

TRANSUNION
1561 E. Orangethorpe Ave
Fullerton, CA 93831

EXPERIAN (formerly “TRW”)
Post Office Box 2106
Allen, TX 75013

In some states, you can obtain a free copy once a year just for the asking. You can also obtain a free copy if you have been denied credit because of information in your credit file or you believe your report contains errors because of fraud. Otherwise, you can obtain a copy for a small fee (usually about $8).

Write a letter to the addresses listed above. Make certain you list your current address, social security number and date of birth. You may also include a copy of your social security card or drivers license showing your current address.

TIP: Some credit reporting companies will automatically reject your request and send you a form requesting additional information, for “security purposes.”

They will ask for such information as your three previous addresses, your phone number, your employer, etc. This is a “scam” for them to obtain more information to sell to the public.

What Information is on My Credit Report and How Does it Get There?

Your credit report has “headers,” which contains information about your addresses (every one they can find), phone numbers (even the unlisted ones), employers, social security number, aliases and date of birth. This information is usually reported by banks and credit card companies that report to the credit bureaus. Some information comes from public records.

TIP: Don't give your unlisted address or phone number to your credit card companies or it will end up on your credit file.

Your credit report also contains a history of nearly every charge card, loan or other extension of credit that you ever had. It will show the type of loan (e.g., installment loan or revolving credit), the maximum you can borrow on the account, a history of payments and the amount you currently owe. It will also show information from public records, such as judgments, IRS liens and bankruptcy filings. Some debts are reported by collection agencies, such as unpaid phone, utility and cable TV bills. Your credit report will also show every company that pulled your credit report within the last 2 years (called an “inquiry”).

How Long Does Information Stay on My Credit Report?

In theory, forever. However, federal law (Fair Credit Reporting Act) requires that any negative remarks be removed upon request after 7 years (except for bankruptcy filing, which may remain for 10 years). If you don't ask, it won't go away.

How Do I Get Information Removed From My Credit Report?

You will find some information that is just plain wrong. Accounts that are not yours, judgments against people with similar names and duplicate items are very common. Some items are more subtle, such as the fact that a debt is listed as still unpaid when in fact is was discharged in your bankruptcy. Ask the credit bureau in writing to re-investigate the information. Under federal law, the bureau must reinvestigate and report back within 30 days. In some states, the law requires a shorter time period. If the bureau does not report back within 30 days, the item must be removed.

TIP: Send your letter by certified mail, return receipt requested.

If you do not get results within the time period specified by your state law or the F.C.R.A., you can write a sterner letter threatening to sue under state or federal law. You can also try to contact the creditor directly. Keep in mind that a creditor may also be liable for reporting wrong information. Before jumping into court, try contacting your regional Federal Trade Commission office and your state Attorney General's Consumer Fraud Department.

How Do I Get Negative Things Removed From My Credit Report?

If you have “bad” items, such as late payments, charge-offs, judgments and a bankruptcy, the credit bureaus can legally report this information. However, if the information is stated in an incorrect or misleading format, you can still ask the bureaus to reinvestigate the information. Sometimes you will get lucky and the bureau does not report back within 30 days. In this event, the information must be removed.

TIP: Do not be too specific with your request.

For example, if a bureau reports that you had a judgment against you and it was paid, do not volunteer that information (a judgment rendered and paid is still worse than no judgment at all). Simply state that the information is incomplete and request that it be re-investigated. In some cases, it is less work for the credit bureau to remove the item than to re-check it.

What Things Affect My Credit?

Credit reports are based on a computer model unknown to the general public (called a “FICO” score). However, it is known that certain things tend to improve your score, such as:

• Installment loans (e.g., home mortgage) that are paid on time
• A few open credit lines with low balances
• A history of living at the same address
• Owning a home

Beyond the obvious late payments, judgments and bankruptcy, there are certain subtle things that lower your score, such as:

• Too many revolving credit card accounts
• Too many inquiries
• High balances on credit cards

How Can I Improve My Credit?

If you do not have late payments, but want to improve your credit score, you should:

• Stay away from multiple department store cards – too many open accounts
• Bring a copy of your credit report when shopping for a loan – car dealers may run your credit a dozen times in one day of shopping leaving damaging “inquiries.”
• Separate your credit file from your spouse and remove each other's names from your credit cards; if you have authorization to use your spouse's card, it ends up on your credit file, too.

Can I Get a Loan with Bad Credit?

This depends on the type of loan. Unsecured loans, such as credit cards and bank “signature” loans usually require a good credit history. Secured loans, such as home mortgages and car loans are a bit more flexible. Lenders are more aggressive and will take larger risks when the loan is secured by collateral. The lender may require a larger down payment and charge a higher interest rate for the risk of lending to an individual with poor credit.

I Don't Like Credit Card Debt – Should I Pay Them Off and Cancel Them?

NEVER! A person with no credit at all is worse off than a person with a bad credit history. You may think that credit cards are evil, but you may not be able to get a phone, a job or even a utility account with a poor credit score. A person with an empty credit file looks somewhere between “suspicious” and “scary” to a company inquiring about your credit. Have a credit card or two, and use them once or twice a year, even if it is just to fill up your gas tank.