Fix Bad Credit ASAP in Raleigh, NC!
If you have bad credit,
a bankruptcy will probably help fix bad credit it A LOT. A bankruptcy itself will hurt your credit score and can be on your credit reports for up to 10 years BUT, it will change your debt to income ratio and you can often come out of a bankruptcy with an immediate and significant raise in from your bad credit score!
is a complex and closely guarded secret, but your debt to income ratio is a big part of it. A bankruptcy helps your debt to income ratio, thus helping your credit score, fixing bad credit. Also, with a Chapter 7, you will not be able to file bankruptcy again for eight years, so your creditors will feel more comfortable making loans to you.
two years after a bankruptcy, your bankruptcy will not affect an application for a mortgage, assuming you have been making timely payments and have not had any foreclosures or repossessions. We also find that for most people who make timely payments post-bankruptcy, after 2 to 3 years creditors do not weigh a bankruptcy very heavily and you can actually have a decent FICO, eliminating bad credit.
Ok, I want to fix my bad credit, where do I get a copy of my credit report?
Everyone is entitled to pull their credit report once per year for free to fix bad credit, or any other reason.
Y9u can also use http://CreditKarma.com to pull two of your credit reports (Equifax & Transunion)
You may also contact the major credit bureaus directly to fix bad credit:
1 888 EXPERIAN (1 888 397 3742) allows you to charge your credit report to your Visa or MasterCard over the phone.
Trans Union Corporation Consumer Disclosure Center
PO Box 390
Springfield , PA 19064-0390
Equifax Information Service Center
PO Box 740241 Atlanta , GA 30374-0241 .
For $8, you can get an immediate report online from Equifax at: http://Equifax.com/resources/fcra_info_rights.html
If you decide to write
to any of these services, be sure to include your: name, address, phone number, previous addresses for the past two years, social security number, birth date, employer, signature-and be sure to include your payment. (You’ll have to call to get the payment amount.) Proof of identity such as a photo copy of your driver’s license will also be required.
There are three major factors that are taken into consideration when granting credit:
- Your income,
- credit history, and
Filing a Chapter 7 bankruptcy will normally improve your ability to repay and, eventually, will repair your credit -especially if you continue some of your secured debts and pay those debts on time. If you show an improved history of timely repayment after filing, bankruptcy can help you improve your chances of getting credit. In essence, it is better to have a past bankruptcy and a clean slate than it is to forever have Creditors that you still owe.
Your FICO Score
Your FICO credit score uses 5 factors
and a 1000 score is possible. Although with some credit reports only 900 or 950 is possible still they all use about the same 5 factors. Filing bankruptcy will only drop a bad credit score of 500 about 20 points at first. By paying on time after bankruptcy your FICO score may increase 100 or more points within 2 years. There are 5 factors that account for the 1000 points and the FICO score is also often used to deny a person employment or increase your insurance rates. Here is how the 5 factors add up to 1000 points.
Previous Credit History
350 points 35% Your Credit History is the largest factor in calculating your FICO credit score. By paying on time and not having any slow payments or charge off accounts you will increase your score as old accounts drop off your record and are replaced by good payment history. (After Bankruptcy as old unpaid accounts drop off and you make payments on time your score improves.
High levels of Debt to Income
300 points 30% If you have a 40% income to debt ratio where 40% of your income is going to car and credit card payments there are no income left for new credit. Simply not having any debts and debts owed automatically increases this ratio and your score. The best thing is to only have necessary credit and just the basic car and mortgage payment. (After Bankruptcy your debt to income is drastically reduced increasing your score)
Limited Credit History
150 points 15% If you have a limited history your credit may suffer up to 150 points
New Credit Applications
100 points 10% Every time you make a credit application it costs you more than 100 dollars. That’s right, 100 dollars. Why? Because it reduces your credit score automatically every time you apply for credit. The little 2 dollar tee shirt Sears gave you for that credit application means that you lost 98 dollars. Dumb wasn’t it. Reducing your credit scores means that when you do get credit that you pay higher interest rates. Applying for credit deducts from your score every time you do it so only apply if you desperately need the item such as a car or home loan.
Limited Types of Credit
10% If you only have car loans and you have no other type of credit your score will be deducted from. You should have at least 3 forms of credit to have the maximum score: a home mortgage, a car loan, and a small credit card with a history of on-time payments small balances and few applications.
Prime, Sub-Prime, and Damaged Credit
Prime If your credit score
is 720 or above, you are considered a “prime borrower” and you have no problem getting mortgages, cars, or credit cards.
Sub-prime Credit scores
below 650-600 are “subprime”. You may have higher interest rates but there are lenders. This extends down to about 500 the lower your credit score the higher your rates and harder it is to get credit.
becomes too expensive to use. You buy on cash. Below 500 is the Damaged Credit Zone. You may get a credit card but at such high fees and uselessly low credit limits that credit is too expensive. Your interest is double the normal rates for prime borrowers. You pay more for insurance and may be barred from some jobs. Bankruptcy is often your only way to repair damaged credit. Old unpaid debts drop off and as you repay on time, credit is repaired.
How Much Does a Damaged Credit Score Cost You?
The few credit cards that are available for people with damaged credit have very low credit limits, high fees. These lenders do not report your good credit activity making it impossible to repair your credit with them.
If you have damaged credit the increased interest you pay for auto financing costs even more.
$20,000 car paid over 5 years:
|COST OF DAMAGED CREDIT||$0.00||$4,722.54||$8,593.30|
The cost of a home can more than double if you buy a home from a sub-prime lender at higher rates. Even a very small home will cost between $100,000 and $180,000 MORE IN INTEREST if you are buying a home with damaged credit.
We used mortgage rates for 2003 and 2004 to show your costs below. $100,000 home paid over 30 years:
|COST OF DAMAGED CREDIT||$0.00||$100,310.48||$180,996.87|
Repair Your Credit Score!
Now that you know how your credit score is calculated
and the costs, you can begin to repair your credit score. Here are the 4 things that will help after bankruptcy.
- 35% of your score. After bankruptcy, pay your bills on time and your score will improve over time.
- 30% Bankruptcy will dramatically lower your Debt to income ratio. Keep your balances low on credit cards and on all of your debts.
- 10% Rarely apply for credit. Applying for credit often lowers scores.
- Make sure the information in your credit report is correct. Removing negative items on your credit report has the largest impact on your FICO score.
Imagine being so poor
that you can’t repay your bills or ever owning a home. Keeping debt that can’t be repaid, and constantly being overdue on your bills, will only keep your credit poor until you do file a bankruptcy.
Filing a bankruptcy allows a person a fresh start and the ability to restructure your budget. It is not the end of getting credit, and people can easily buy homes after they have filed. A bankruptcy should be considered, when the bills are never going to be paid with the income that is available, and when your family is going to suffer unless that debt is cleared up.
A bankruptcy stays on your record
with credit reporting companies for 10 years after filing. Other kinds of “bad credit,” like “slow pay” or “no pay” or repossessions, stay on your record until 7 years after the last collection activity-which means it can actually be on your credit much longer than a bankruptcy.
For instance, your car may be repossessed 4 years after the loan is taken out, and you may be sued 7 years later when they find you have a job. In that case, the record of non-payment would be on your credit record for at least 18 years (4+7+7), but a bankruptcy would have been on there for only 10 years. Slow payment will give you the same kind of credit problems that a bankruptcy filing will give you, even if you pay all the money back. Normally, credit or loan officers do not consider credit history that is more than two or three years old. It will take you about 6 months to 2 years of repaying your debts on time to overcome most of the negative effects of a bankruptcy.
Buying Good Credit
Besides pay your bills on time, financing a car or a home there are other things you can do to help your credit. We recommend you take $500 — $1,000 and get a secured loan for the same amount from a bank.
A secured loan is where they get to hold something of value in case you default on the loan. In this case it is the $500-$1,000. You give them the money, they give you the same amount in return. You have them take payments out of the security. You pay them a low interest (because it is secured) and they make regular reports to the credit bureaus that you are making timely payments. The only thing this costs you is the interest payments! Take the money they loaned you and repeat it with another bank, then repeat it one or two more times and you will have three or four banks making positive reports on your credit reports! Just make sure you pay the interest and close the accounts a month before you attempt to take out a regular loan.
In accrual accounting initially, a bill is treated as income to the creditor. Later, upon nonpayment, a decision is made that a debt won’t be paid, so a loss deduction is taken off of income.
IMPORTANT: Just because a debt is being written off it is still owed and collectible — and that’s often overlooked!
Why Should You Pull Your Credit Reports?
Many times in an NC Bankruptcy, clients forget creditors, especially on old debts where there has been no recent attempt to collect. With a full report, we can add these debts into your bankruptcy petition.
that just because a debt is not listed on your credit report does not mean you don’t owe that particular creditor money. Many companies do not report to the credit bureaus, or they only report to one instead of all three. This is because it costs them time and money to do so. CREDIT BUREAUS ARE NOT GOVERNMENT AGENCIES AND HAVE NO LEGAL STANDING WHEN IT COMES TO WHAT YOU OWE. THEY SIMPLY KEEP TRACK OF WHAT COMPANIES WHO REPORT TO THEM SAY YOU OWE. After 7 years of non-payment the debt is removed from your credit report – BUT YOU STILL OWE IT.
Often clients have old
or otherwise wrong addresses for creditors. The credit report will generally have the correct address.
Surprisingly, many times credit reports
contain wrong information and you have to fix bad credit. It is easier to just include these incorrect debts in your North Carolina bankruptcy than to dispute them. Judgments can stay on your credit report for 10 years and be renewed, so essentially they can be reported forever.
If you mistakenly put down a wrong address
or other information that needs to be changed after we file your petition for North Carolina (NC) Bankruptcy, there will be AT LEAST an $86 charge for the amendment (court cost + attorney fees). It pays to get your credit reports!
Accuracy of Your Credit Report Post-Bankruptcy
In order to make sure that credit reporting agencies accurately report your credit situation, you should send them a letter AFTER you receive your discharge to insure that they have the correct information. Below you will find the addresses for the three major credit reporting agencies. You should use the following paragraph to create a letter to mail to each agency:
“I recently filed Chapter 7 bankruptcy. I have enclosed all pertinent information regarding my bankruptcy. Please update my credit report to reflect my Discharge date and all bankruptcy information for the scheduled creditors.”
Mail each agency:
- a copy of your letter, including the above paragraph
- a copy of Schedules D, E, and F of your bankruptcy petition
- a copy of your Discharge sheet.
In response, you should receive a free copy of your credit report from each agency. If the credit report still appears to be inaccurate, we can handle the situation for you for an additional fee.
If you need to know, step by step, how to clean up your credit report go here.