credit score

A creditor has no right to come into your home…

For more than three decades I have heard horror stories spread by collection companies and creditors about bankruptcy and a credit score.  First, always consider the source – collection agents make a percentage of each dollar they collect – sometimes upwards of 25%, plus bonuses.  The creditor’s employees are paid to collect the debt and many have no respect for the truth.  Years ago a collector for an American Express debt told my client, a newly widowed senior citizen, that the law requires her to allow the collector to come to her home and take her property.  He said he would be there that afternoon and that she must let him into her home.  (I don’t believe he was actually employed by American Express because I have never heard a similar story since.)  Of course, she believed this creep, but fortunately she called us before falling into his web of deceit.  I explained the law – no creditor can take anything without a court order and even then the basic necessities (such as social security, furniture, small vehicle, etc.) are exempt (protected).  That afternoon, my paralegal went to her home and spent time talking over tea and cookies.  (She sent some home and they were really good!!)  The next week we filed bankruptcy for this sweet woman and stopped all the calls and harassment.  I can only hope there is a special spot in hell for this young man who terrorized this innocent woman at a horrible time in her life (she was married for than 50 years and her husband took care of the finances).

Does bankruptcy really help rebuild your credit score?

After bankruptcy, credit scores go steadily up, says a 17 year study released by the Consumer Financial Protection Bureau.

  • Median credit scores increase steadily from year-to-year after consumers file a bankruptcy petition. Median scores for Chapter 7 filers recover more quickly than those for Chapter 13 filers possibly due to the much quicker and more likely discharge of Chapter 7 filings. (See charts below prepared by Consumer Financial Protection Bureau)

Your credit score will increase as time passes after bankruptcy

You can see from the charts above that your credit score will continue to rise after bankruptcy.  The longer you wait, the higher your score.  There are things you can do to increase your score.

Credit reports are notoriously wrong

It is very important to pull your credit reports 6 months after filing a bankruptcy and look for errors.  Attorney Mike Cardoza lays out how to do that in How To Spot Credit Report Errors After Your Bankruptcy & Fix Them.

Have a plan and stick to it.

Don’t get so fixated on your credit score that you forget to use common sense.  Don’t take on debt that you cannot afford to repay.  Be very careful in signing up for more than two credit cards.  Always pay the balance on the credit care BEFORE the date that credit card reports to the credit bureau.  Never carry more than 20% of the available credit on any one credit card.  Do plan ahead – it you want to buy a home or vehicle then to commit lots of time to rebuilding your credit score (that will save you thousands of dollars in the monthly payment).

Be careful about the credit “gurus”.  Even though I give my clients a copy of Dave Ramsey’s Starting-Over-Dave-Ramseys-Survival-Guide.pdf (431 downloads) , I warn them that some of the suggestions (like paying cash for a vehicle) are fine if you are wealthy (as is Mr. Ramsey), but they need to use their common-sense.

Stay away from the “debt repair” companies – they are scams!!  Learn to recognize scams.

credit scoreNever use a credit “repair” company – they will be happy to take your money, but never follow through with their promises.  Most fill increase your credit score for 30 days, after which all the debt will be back on your credit report and you will be out hundreds, if not thousands of dollars.


Always be smart when asking someone for their help.  What is their motive?  How do you feel about them (trust your gut)?  Never work with someone who contacted you first (I guaranty it is a scam and will put you in worse shape than before you hired them). Always ask questions and insist on getting answers.  Don’t borrow from yourself (take money out of your retirement) or continue to use credit to pay credit (a true symptom that financial collapse).