Will Bankruptcy Be Removed from the Credit Report after It Has Been Discharged?

A credit bureau collects the information about a bankruptcy from the public records on the date of its filing. After this depending upon the section under which the bankruptcy was filed, it maintains the record in the credit record for a period of 7 to 10 years. A chapter 7 bankruptcy will reflect on the credit report for a period of 10 years from the date of its filing whereas a chapter 12 bankruptcy stays on for a period of 7 years. The discharging of bankruptcy has no affect whatsoever on the record that is maintained on the credit report.

Generally, chapter 12 bankruptcies get discharged without any delay, after the period allowed for filing objections against bankruptcy by the creditors is over. This is normally duration of 60 days from the date of the filing. A chapter 7 bankruptcy usually involves some sort of payment schedule with under which the debtor pays off the creditors over a period of five to seven years. Only after this payment schedule has been completed does chapter 7 bankruptcies gets discharged.

It is for this reason that a chapter 7 bankruptcy is kept on a credit report a period of 10 years whereas a chapter 12 bankruptcy is recorded only for seven years. After the respective duration is over the record of the bankruptcy and all the accounts that were included in it get deleted from credit report.

Incase this does not happen automatically, please contact the credit bureau and send them the documentary proof of your bankruptcy schedule.

Effect Of Declaring Bankruptcy On Creditor Accounts On Credit Report

The record for your bankruptcy filing and your credit accounts are two spate records maintained on your credit report. Neither filing for or discharging the bankruptcy has an effect of removing the credit accounts from your credit history. the creditor merely updates their status with the credit bureaus that reflects that these accounts are now a part of the bankruptcy filing. Incase a creditor does not update the status of these accounts, you should provide a copy of your bankruptcy Schedule A, which lists all of the accounts included in the filing.

The accounts that were included in the bankruptcy filing are treated in 2 following ways.

Accounts That Were Delinquent Prior to the Filing of the Bankruptcy

The first thing to remember is that all delinquent accounts are removed from your credit history after the completion of seven years from the date of first delinquency, regardless of whether or not they were included in the bankruptcy filing. As it most often happens the credit accounts become delinquent before the actual the filing of the bankruptcy. In fact, overwhelming debt and delinquent credit accounts is the foremost reason for declaring bankruptcy in the first place.

These delinquent accounts whether or not there included in the bankruptcy filing, will be removed from your credit report seven years after they went delinquent. Since a bankruptcy stays on your credit report for 7 to 10 years, it is likely that these delinquent credit accounts will be removed before the bankruptcy record. However, if for some reason you discover that these accounts are still present on your credit report after seven years you should immediately find a dispute with the respective credit bureaus.

Non Delinquent Accounts That Were Included in the Bankruptcy Filing

If an account was included in the bankruptcy filing which was not delinquent at that point of time, then such accounts will be removed from the credit report, either after seven years of becoming delinquent or along with the removal of the record for the bankruptcy, whichever is the earlier. Before that these accounts will be updated by the creditor and show the status of being part of a bankruptcy filing. Even after the discharge of the bankruptcy, these accounts will stay on the credit report till the above explained duration is over.

The record for a chapter 7 bankruptcy lasts for 10 years on a credit report whereas the record for a chapter 12 bankruptcy lasts for 7.

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What Is Credit Report Security Freeze And How It Affects Your Credit Report

There is usually a fee associated with putting a security freeze on a credit report. As you may well be aware by now, under the Fair Credit reporting Act, certain agencies can collect information from your credit report as long as they have the justifiable purpose. In case you want to restrict this access and do not want anyone to access your credit report without your knowledge or permission, you can place a security freeze on your report. When you do this, you will be provided with an identification number and password. Whenever you wish to remove the security freeze or wish to lift it temporarily, for a specific person or purpose, you will need to use this code.

You should be aware that putting a security freeze may delay or interfere with timely approval of application that you make for loans, credit, mortgage, insurance, rental services, rental housing, employment, investment, license, cellular telephone, utilities, digital signature, Internet credit card transaction or other services, including an extension of credit at point of sale.

Whenever you are seeking credit you will need to request the lifting of the security freeze. Since this may take some time, it is advisable to foresee the requirement and make the request well in advance. You will be required to provide the identification number, sufficient proof of identity and a statement specifying either the person or the duration that you want the freeze lifted for.

You should also remember that a security freeze may not apply to your existing creditors and service providers that you do business with. Before placing a security freeze you should be clear as to what purpose you want the security freeze to serve and whether it can be accomplished by following this method.

There are different laws governing rules regarding placing a security freeze on your credit report in different states. The fee is around $10 for placing the freeze and none for lifting it for specific periods or people. Depending upon the state rules this fee can be waivered if you are a victim of identity proof and can submit a valid investigative or incident report, complaint with a law enforcement agency or the Department of Motor Vehicles (DMV).

Click here to learn more about placing a security freeze on Experian credit report.

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How Does a Collection Account Show Up in Your Credit Report

When you stop paying the recurring installments on any loan or credit card, the amount that it is due will most likely be handed to the collection agency for recovery. This is usually happens when the payment gets delayed by more than 30 days and the communication to resolve the issue with you fails. If start making the payment on your loan account once it has gone into collection, such an account will show in your credit report as ‘collection account’ till the time that your account does not come out of collection.

Even after you have finished in the amount of what your collection account, this information will reflect in your credit report for a period of seven years from the date of initials missed payment.

Does a Credit Bureau Approve or Deny Credit Applications?

The credit bureaus only collect information about your credit behavior from your creditors and credit service providers that you do business with. Furthermore they use one of the standard algorithms to determine your credit score. The most popular amongst the credit scoring models is perhaps the FICO score model. A credit bureau only records information related to your credit and information from public records such as tax liens, bankruptcy filings on the chapter 7, 11 and 12, federal court judgments that are related to monetary matters, name, address, phone number and social security number. The denial or approval of credit is done solely by the creditor. When you present an application for credit, the creditor will almost always request a copy of your credit report from one or all of the three national credit bureaus. Based on what the creditor perceives as favorable or unfavorable information on your credit history, they will accept or deny your application for a credit. Different creditors may look at different aspects of your credit report in order to ascertain your creditworthiness for the service you have requested.

Most of the creditors and financial services work on an equal exchange of information policy with the national credit bureaus. This means that not only can they access your credit report under the fair credit reporting act but also provide the credit bureaus with information on your credit behavior when you to business with them.

Why Can’t Information Be Deleted from the Credit Report?

The Recording of Information on Your Credit Report Is Governed by the Rules Set by the Fair Credit Reporting Act.

This law states who can and cannot record and share information about your credit record. This also lays down the guidelines for the procedure to be followed in recording the credit behavior of a consumer. Credit report is meant to be an accurate reflection of the creditworthiness of an individual based on his past and current credit behavior. Hence it is not permissible under the law to simply delete information from the credit report which you may find unfavorable.

The only information that can be removed from a credit report is that which is updated or wrong. And the only way to do this is by filing a dispute with the particular credit bureau in whose credit report you have spotted this erroneous information. The Fair Credit Reporting Act also dictates that the credit bureau has two investigate every dispute foiled within a period of 30 to 45 days. If you’re dispute is found to be rightful then the disputed transactions are deleted from your credit report.

There are exceptions to this situation. There are times when certain adverse and negative accounts can be deleted from the credit report. One classic example is that of debt collection accounts. When a collection agency contacts you to recover a debt and asks you to pay up, you have the right to ask them to verify the debt. Verification of the debt requires that the collection agency provides you with a copy of the original contract that you had with the original creditor that makes you responsible for the debt. There are also other documents and authorization proofs that it is required to provide. In many situations the collection agency is not able to provide this verification. Especially if the debt has been passed hands with more than one collection agencies. If you dispute such a collection account and it cannot be verified, you can have it deleted from your credit report.

A similar situation is when the creditor does not respond to a request for verification of account to a dispute filed by you with the credit bureau. If the creditor does not respond to the credit bureau query within a specific time frame which is about ten days, the disputed account is deleted from your credit report. Creditors sometimes fail to respond to credit bureaus when disputes are filed. This can be for several reasons i.e. the creditor did not think it worth the time and botheration, he no longer had the paperwork for an old debt, you settled the debt account with him and he agreed not to report it etc.

 

 

How Long Does Negative Information Stay on a Credit Report?

Different information stays on credit report for different durations of time.

  • Personal information such as your name, address, telephone number and Social Security number are a permanent feature of your credit file. They are always mentioned.
  • Most of the information including missed payments and defaulted accounts stay on a credit report for a period of seven years. This is why you need to be careful about your making payments on time. A single instance of collection can reflect on your history for a period of seven years even though it may have simply been that you forgot to make the payment on time. The seven years are counted from the date that the incident, e.g. late payment, first occurred.
    However, most of the late payments are only reported after 30 days of delay and given for collection if you are found to be unreachable through conventional means like email and phone. Collection accounts also fall off when the original date of the late payment is past seven years. It has nothing to do with the date that the collection account was created.
    Reporting of late debt accounts also has nothing to do with the statue of limitation on the debt. The collection account may be reported to the credit file even if the statue of limitation on the debt is over and the collection agency no longer has any legal right to sue you in the court for it. And vice versa. Just because an account falls off your credit report after seven years does not mean that the creditor cannot sue you for it in the court of stop his effort to recover it from you.
  • The exception to the rule of seven years is for public records of tax liens and chapter 7, 11 and 12 bankruptcies which remain on the credit report for a period of 10 years. Paid tax liens remain on the credit report for a period of 7 years after they are paid off. Tax liens will continue indefinitely on the credit file if not paid.
  • Another item that shows on your credit report are enquires. Every time a creditor or another, such as a potential employer, makes a query for your credit report, the same gets recorded in your credit history. This enquiries stay on for a period of 2 years.

However, not all enquiries have adverse affect. Only the enquiries made as a result of a credit application have a potential for impacting your credit score. Not the ones that are made by other people and for other purpose like employment, by a landlord and by yourself when requesting your own credit file from the credit bureau.

What Are The Benefit Of Credit Reporting?

In the current times the buying power of the consumer is largely dependent on the amount of credit available to him. If you are like the majority of people you will need money on loan and credit in order to accomplish your lifelong goals. For example almost everyone purchases a home or a car by taking a lump sum of money on credit from a loan provider such as your bank. As the need for money has increased over time so has the demand and need for credit.

Lenders needed a reliable and stable system of determining the creditworthiness of an individual was required in order to make this process quick and risk proof. Having a national system of credit reporting has provided the creditors with the quick way of determining the credit worthiness of an individual. It has done away with complicated and tedious procedures that would require tons of paperwork to be filed every time you required money on credit or at least has managed to reduce it to a large extent.

You may or may not be aware of the fact, but credit reporting has existed in one form or the other for more than a century. In times when a formal or legal system was not in place, lenders still maintained records about their borrowers and shared them with other lenders who wanted to know how reliable a borrower was with paying back the money he borrowed. Gradually, some people made it their business to investigate and record the credit worthiness of consumers.

In fact, the system of credit reporting that exists today in the US, where 3 major credit reporting agencies, CRAs, do the majority of business, has been the result of mergers of hundreds of smaller credit reporting firms all over the nation. Even now, it is not uncommon to find a smaller credit reporting firm in a city or town that is in fact a subsidiary of one of the larger credit bureaus, Experian, Equifax and TransUnion.

A somewhat standard and unified credit reporting system, that is governed in many aspects of its operations by federal law, all across the country has enabled you to purchase homes, rent automobiles and shop using your credit card regardless of where you are situated. This would have been impossible without the presence of a credit reporting system. Your credit report and credit history speaks of your creditworthiness and responsibility with finances no matter where you go. Even while taking an apartment or a house or rent the landlords like to look into your credit history in order to determine whether you are a viable tenant or not.

Today, what your credit report has to say about is not only used when you apply for credit. It also comes in to reckoning when you apply for a job, are looking for a home rental, apply for utility services and also when you apply for insurance. (In certain states, using information in a credit report and credit score for evaluating the premium and approval for insurance is prohibited by law.)

A credit reporting system and you credit history enables you to carry your creditworthiness along with you no matter where you go. It speeds up any and all aspects of transactions and dealings that of a financial nature.

Since a majority of financial institutions rely on the same credit report for the purpose of extending you credit, this system fosters a healthy competition among the various financial services where one tries to out to the other in providing you with better interest rates and deals. Special benefits are offered to customers with a consistent and favorable credit history.

Can a Credit Repair Clinic Actually Help Me With My Debt Problems?

Many people are inclined to spend hundreds and even thousands of dollars on services that claim to radically improve the credit score per person in a short duration of time. It is a well-known fact that the best way to repair your credit history is to display responsible and consistent credit behavior. The most that many so-called credit repair clinics can do for you is to dispute the inaccuracies and errors on your credit report. This is something that you can to yourself and at no extra cost. All the three national credit bureaus have made it very simple to while disputes online. Read law requires the credit bureau to investigate each and every dispute within the required age at the time which is usually 30 to 45 days.

No credit repair clinic or service can simply delete the negative information from a credit report in spite of what they may promise you. In fact the federal law makes it illegal to attempt to do so. The only way that a negative entry in your credit report can be deleted is if it is disputed and proved to be inaccurate or in error.

The best way to fix your credit is to set yourself up for a long term goal of meeting your payments and getting out of debt. In case you need help in doing this you can approach legitimate credit councilor. He/she will help set up a financial plan for you that will in turn increase your disposable income. There are several voluntary organizations that provide credit assistance to people at no extra charge. Even if it is a paid credit counseling session that you opt for, the fee is usually reasonable and less than $50. The professional credit counseling service is usually able to come up with the plan to get you out of debt after just one or two sessions. In case they are not able to crunch the numbers that will enable you to start paying off your debts and meeting your monthly expenses as well, they will recommend other options as well.

Extra caution must be exercised if signing up with a credit repair clinic or service that you have seen advertised online. Many scams and frauds in this arena of work have cropped up with the sole intention of ripping people of their money.