Saturday, September 3, 2011

What's the difference between good credit and a credit report?

When clients speak to me about a pending foreclosure of their home or crushing credit card debt, they also ask how filing a bankruptcy petition to address these issues will impact on their credit report.

First, a credit report is merely a history of your credit.  So, by the time a client is considering bankruptcy, their credit report has already reported things like delinquencies, late payments, judgments or a foreclosure.  Thus, bankruptcy is but one more thing reported.

Second, good credit or credit worthiness is something different entirely - that is a conclusion a lender or store or company makes when reviewing your credit report/credit history to determine if you are a good credit risk for that particular lender,store or company.

Your credit report could show that you pay all of your bills on time, yet a lender might conclude that you are not credit worthy because you have too many credit cards or too much debt.

You could have filed a bankruptcy petition and cleared all of your credit card debt, and determined to rebuild your credit by paying bills on time, taking out and paying a car loan on time, or using secured credit card to help rebuild your credit. After a bankruptcy filing, the balance for each discharged debt should be zero.  If a balance is showing on your credit report, you should contact the credit reporting agency to zero out the balances due to the bankruptcy discharge, and you are entitled to one free credit report each year.  For more information on how to correct reporting errors and how to obtain your free credit report, click below.

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