After bankruptcy discharge: Getting back to good credit

About two months and two weeks after your bankruptcy trustee hearing, you should get your bankruptcy discharge.

You should get your bankruptcy discharge about two months and two weeks after your bankruptcy hearing

When you get the discharge, it’s time to go to work on your after bankruptcy good credit.

To get back to good credit, you need to get a credit card.

Most people get a couple credit card offers in the mail.  You may have to pay $139.00 application fee to get a $300.00 credit card.

But a $300.00 credit card can get you something that you really need–good credit after bankruptcy.  Charge gasoline, or something you have to buy anyway, every month.  Pay it in full every month.

After about six months, you’ll start getting pre-approved $1000.00 credit cards.  I recommend you get three or four.   (It helps your credit score to have higher credit limits–as long as you don’t use those high limits.)

Each week, drive around with a different credit card in your pocket and use it to charge that week’s gas.  Each month when the bills come, pay them in full.  (You are NOT trying to get back in debt.)

Three years of doing that and you’ll be back to good credit again.

What if I don’t get any after bankruptcy credit card offers?

Here’s the credit card page at bankrate.com. At the drop down window, search for “cards for bad credit.”  They show about 40 cards.

Look for a card that tells you they report to the three credit bureaus.  I see Orchard Bank Mastercard and Visa, the Capital One secured Mastercard, the Public Savings Bank secured Visa, and the Applied Bank Visa Gold card.  Try one or two of those.

Is there anything else to improve my after bankruptcy credit?

Here’s a trick that works wonders if it applies to you. If there’s a credit union where you work, and you didn’t owe them any money in your bankruptcy, they might help you with a loan secured by your share savings account.

Here’s how that works.  You put $200 in a savings account at the credit union. The credit union then lends you $200 until the next payday. You make a direct deposit that pays off the loan out of each paycheck. Then you borrow the money again.

This means you are paying interest on your own money. But it does wonders for your credit score. An example of what I mean is the Apple Federal Credit Union “Share Secured Loan.”

Does paying my car loan help my after bankruptcy credit?

One question people often ask me:  Since I am paying my car loan, doesn’t that help me get back to good credit? The answer to that is, No. Unless you reaffirm your car loan–which I really do NOT recommend–you car is going to show on your credit as “discharged in bankruptcy.” That’s even if you continue to pay.

Here’s the reason for that. Even if you didn’t want to “include” your car in the bankruptcy, you can change your mind at any time. All you have to do is stop paying. They can–and will–repossess your car. But they cannot come after you for the money. They also cannot legally hit you with a repossession on your credit report. The bankruptcy protects you.

That’s why the credit bureaus show “discharged in bankruptcy” on your car loan–even if you are (now) still paying.

How important is my after bankruptcy credit?

Many people right after bankruptcy get offers from a car dealer.  Within a few months, you’ll be able to get approved for a car loan–at about 29%!!  You do not want to do that.

At 29% interest, you pay $18,000 in interest over five years on a $20,000 car.

If you work hard to rebuild your credit over three years, you should be able to get a car loan at less than 8%.    At 8% over five years you pay $4300 in interest on a $20,000 car.   That’s a difference of $13,700!

Each month that you do what I say–charge three tanks of gas and pay your cards on time–you knock $380 off what that car will cost you in interest!  So please.  Spend the next three years building back to good credit.  And do not buy a car–if you have any way at all to get to work–until you’ve worked for three years rebuilding your after bankruptcy credit.

Getting your after bankruptcy credit report right.

A judge in California gave the credit bureaus have two months from your discharge to get your credit report right.    (So there’s no need for you to pull your credit report before that two months is over.)  The credit bureaus do get your credit report right more than half the time, but not a lot more than half the time.  HSBC is a big offender.  And there’s a big problem with many mortgage companies.

That’s why–back when you first signed your bankruptcy papers–we had you sign letters to each of the three credit bureaus.  Those letters reminded the credit bureaus how your credit report is supposed to look after bankruptcy.   (I have more about that, here.)

We’ll mail out the letters you signed for you after the two months is over.  That should lead to “corrected” credit reports coming to you in the mail.  One from each of the big three credit bureaus.  Experian, Equifax and Transunion.

When those come in, mail them to my credit report paralegal, Janet Robertson.

Credit report paralegal Janet Robertson has studied thousands of after bankruptcy credit reports

Janet Robertson    Law Office of Robert Weed  7900  Sudley Road  Manassas VA 20109.

What if the credit bureaus ignore the letters?

Sometimes, the credit bureaus just ignore our letters.  (Equifax right now is doing that a lot.) At that point we do need you to pull your credit reports for us.

Here’s what to do.  If four months from your discharge go by and you haven’t heard from the credit bureaus, please download your own credit reports and send them to us.

Please go to:  annualcreditreport.com.  (And please avoid freecreditreport.com.)  You can get one free credit report each year from each of the three bureaus at annualcreditreport.com.

Another way to get the credit reports, is to call the 800 numbers of each of the three credit bureaus.

Equifax        1-800-997-2493

Experian      1-888-397-3742

Trans Union 1-800-916-8800

Please make a copy and mail them to us.  Or print them to pdf and email to:  [email protected].

One more thing–these credit reports are evidence.  (At least if there’s something wrong and we sue, they are evidence.)  For them to be evidence, we have to get them from the credit bureaus at one of the places they have designated.  Not from 3 in 1 resellers.  Not from someone like freecreditreport.com.  Anything that’s in a three column format won’t be good evidence.

(Each credit bureau sells all three–and makes money doing it–but those aren’t good evidence.  What Experian sells you as an Equifax report isn’t evidence of what Equifax is really saying.)

Also, please don’t write on them.  If you have some comments or questions, please email them or send them on another sheet of paper.  Thanks.

Getting your after bankruptcy credit report right could save you hundreds of dollars, or even thousands, when you are ready to buy a car after bankruptcy.  So please stay in touch with us.

If you do, we will work with you, until your after bankruptcy credit report is right.