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Rebuilding Credit

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Your Credit Score Matters

A poor credit score can affect your financial future.  You will pay more interest on a car loan, you may be denied on a mortgage, or you may be turned down on your apartment application.

How is my Credit Score Determined

In order to improve your credit, you need to know what your credit score is based on.  Your credit score is based on these five primary factors:
  • Payment history
  • Amount of money you owe
  • The length of time you have had credit
  • How recent is the good/bad credit news
  • How diverse is your credit
Other factors may go into a bank’s decision to loan you money, but these are the five primary factors that go into your credit score.

What is a FICO Score

The FICO score is a credit rating system developed by Bill Fair and Earl Isaac roughly 60 years ago.  They created the Fair Isaac Company, and from there and over time, the credit scoring term became shortened to “FICO”.

When you apply for a credit card or loan, the lender wants to know the answer to an obvious question – “What are the odds you will pay this loan back?”.  Banks use your credit score as the primary way to evaluate you as a credit risk.

Your “FICO” score is calculated from the information contained in your credit reports (Experian, TransUnion and Equifax).  Ninety percent of the largest lenders in this country use your FICO score to help make lending decisions.  Each bank or credit union determines how much risk they will accept when deciding whether to make a loan to you, and their decision is guided in large part by your FICO score.  Some banks are willing to take on a lot of risk, and others will take almost no risky loans at all.

To calculate a FICO score, your credit reports must have enough recent information on which to base a score.  Not having any debts does not mean you have good credit.

Getting a Free Credit Report

You can obtain a free copy of the information in your credit files.  One time every twelve months you can go to the following website:  The information in your credit files will be immediately available online, and you should print it.  If you do not have internet access, you can call this toll free number (1-877-322-8228) to obtain your copies through the mail.

Review your free credit reports every year.  Run the reports every January 1st, or on your birthday each year.  Know what information is in your credit file.  Your banker will review it and so should you.

Fixing Mistakes on your Credit Report

Some credit files contain mistakes.  The credit reporting agencies have a duty under the Fair Credit Reporting Act to allow you to fix incorrect or mistaken information.

Every item in your credit report can be disputed if it is inaccurate.  Whether you obtain your credit report online or through the mail, each credit reporting agency will provide you with a dispute form and instructions.  Challenge every item that is incorrect in your credit file.  File a dispute form.  You must file that dispute with each credit reporting agency.  Fixing one report does not automatically fix all three.  The effort can be tedious and time consuming, but mistakes need to be cleared up.  If you need assistance, an attorney can help.  Let us know.

Once you file the dispute, the credit reporting agency has thirty days to verify the information.  If they cannot verify the negative information, they must remove it.  Fixing mistakes can quickly increase your FICO score.

Accurate information that hurts your credit score (missed payments, repossessions, charge offs, etc.) will eventually “age off” of your credit file, but this takes time.  Beware of anyone or any company who claims they can remove accurate derogatory information from your credit file.  Many of these services are nothing but a scam.

Bankruptcy and Credit Scores

A Chapter 7 or Chapter 13 Bankruptcy filing will stay on your credit report for 7 to 10 years.  Many clients fear that filing bankruptcy will hurt their credit score, and to some extent that is true.  Although a bankruptcy will stay on your credit report for a long time, in many cases it can be the only way to begin to fix your credit.

For many people who are considering filing for bankruptcy, your good credit may already be a distant memory.  Once you start missing payments or your car is repossessed, your good credit is probably past the point of no return.

Many of our bankruptcy clients tell us that they begin receiving credit card offers and car loan offers as soon as their bankruptcy closes out.  Lenders know that once your bankruptcy has wiped out your old bills, you have more disposable income each month, assuming you still have the same income.  To be sure, many of these credit cards and loans are at high interest rates and carry higher fees than you might prefer, but do not be misled into thinking that you are not allowed to have credit cards or loans for seven years.  In fact, many clients tell us that they are qualifying for “regular” loans roughly three years after their bankruptcy discharges.  This assumes, of course, that you are paying your bills on time after you get out of bankruptcy.  It takes time to rebuild your credit.

Know the law and the benefits and protections you are entitled to.   KNOWLEDGE IS POWER

What do I need to do before meeting with an Attorney?

  • Print all three credit reports (
  • Bring any paperwork you have showing why this information is inaccurate
  • Bring checks or bank statements that show you paid off an incorrectly listed item 

How do I contact Banik & Renner?

CLICK HERE to contact us or call 574.293.7170 for more information about rebuilding your credit or to schedule an appointment.

Bankruptcy Frequently Asked Questions

Does my spouse have to file for bankruptcy if I do?
No. However, keep in mind that if you and your spouse are both liable on a debt, your non-filing spouse will remain liable on the debt.  So, if the non-filing spouse is only liable on a small amount of joint debt, he or she may choose not to file so as to avoid having a bankruptcy on his or her credit report.

Can my boyfriend, girlfriend, significant other or domestic partner and I file for bankruptcy together?
No.  Only legally married couples can file a joint bankruptcy.  If you have joint debts, the non-filing individual will remain liable on the joint debt.  If both of you have significant debt, together or separately, you would both have to file separate bankruptcies.

How long will I have bad credit after filing a bankruptcy?
That is largely up to you. If following the discharge of your debt you are able to avoid negative reports on your credit report, your credit may begin to improve within a year.  Generally, most lenders require good credit for 3 years following the filing of a bankruptcy.

If I file bankruptcy will my wage garnishment stop?
Yes. Your employer must receive notice of the filing of your bankruptcy and the creditor must also receive notice in order to stop the garnishment.  Your bankruptcy must be filed with the court to stop the garnishment. It is not sufficient to notify the creditor that you intend to file bankruptcy.

How soon will the creditors stop bothering me after I file for bankruptcy?
An automatic stay goes into effect when your bankruptcy is filed.  Once a creditor receives that notice from the bankruptcy court the creditor must stop calling you, sending out collection notices and of course, must stop any court actions including garnishments.

Chapter 13 Frequently Asked Questions

If I have to pay back debt in a Chapter 13 why shouldn’t I just enter into a debt repayment plan with a debt consolidation company?
In a Chapter 13 most debtors are not required to repay all of their unsecured debt compared to a debt consolidation plan where all of the creditors must be paid in full.  In a Chapter 13, any debt that is not repaid is discharged and you pay no taxes on the debt that was discharged. In a debt consolidation plan “debt forgiveness” will result in the creditor sending you an IRS Form 1099 for the amount of the debt that you did not repay.

How many years does a Chapter 13 last?
Most Chapter 13 plans are 5 year plans.  In some instances where there is little debt or the debtor is a high wage earner, 3 year plans are possible.

Click here to contact Attorneys at law, Banik and Renner or call 574.293.7170 to learn more about filing for bankuptcy.


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