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Sep 2015

Fred’s after bankruptcy credit score is 707

Posted by / in After Bankruptcy, Weekly Posts /

Fred’s after bankruptcy credit score is 707

Fred M was a small business owner.  Because his business was dragged down by the recession, he has $50,000 in credit cards that had gone bad. Last fall Bank of America sent him a warrant-in-debt in a $17,000 credit card. So, Fred filed bankruptcy with me in October 2014.  It was discharged in March 2015.

Fred M after bankruptcy credit score 9-13-2015 2-08-00 PM

Six months after bankruptcy, Fred’s credit score is 707.

Credit Karma shows his credit score is 707!  That’s six months after bankruptcy discharge. The median credit score in Virginia is 694.   Six months after bankruptcy, Fred has a better score that half the people in Virginia! Not everybody recovers as fast as Fred.  He’s obviously been working hard at it.  But this tells you for sure, bankruptcy does NOT mean ten years of bad credit. 

In fact, most people who file bankruptcy have a “sharp boost” in their credit score.  (That’s not me, saying that.  That’s a study of after bankruptcy credit scores by the New York Federal Reserve.)  

 Fred Wasn’t Bragging When He Sent Me His Credit Report

Fred sent me his credit report because he wanted to make sure it was right.  

Ten years ago most people’s after bankruptcy credit reports had three or four creditors still reporting them as late.  About fifty lawyers around the country, I’m one, have sued them for ten years.  And they have gotten a lot better.  I’m thinking now that only about one third of people still have one or two “charge off” or “collection” instead of “bankruptcy discharge” on their after bankruptcy credit report.

It turns out Fred is one of those.  Capital One left “collection/charge off” on page 9 of his report.  I’m just guessing that’s costing him ten points on his after bankruptcy credit score.

This afternoon, I’m showing Fred how to dispute that.  (Fred has to do a dispute because you do NOT have the right to have your credit report right. You only have the right to an investigation.)

If they investigate, Fred’s dispute will fix it.  If they don’t, we’ll sue.  (This promise to protect your after bankruptcy credit score is part of my exclusive five year bankruptcy warranty.)



Sep 2015

Maria’s credit score after bankruptcy is 640

Posted by / in After Bankruptcy /

In just thirteen months, Maria’s credit score after bankruptcy was above the national average

Are you one of the people who still thinks bankruptcy hurts your credit score?  

Maria M was worried about her credit score when she came to talk to me in November 2013.  That’s part of the reason she put off filing bankruptcy until spring 2014. But a second mortgage on a foreclosed home was suing her for over $50,000.  She knew she had no choice.

Fast forward to August 2015. Maria brings in a family member who has also been putting off filing bankruptcy.  And Maria tells me her credit score is back up to 640.  She was so happy that her credit score after bankruptcy was moving up so fast.


Your credit score after bankruptcy

Your credit score after bankruptcy is your road to a better life. A 640 score can be good enough to get an FHA mortgage.

Now 640 is not a great score. But it can be good enough. Although 640 above the 630 national average of scores, it just gets you out of the bottom third of people. (Some people have really, really bad scores.) 

That 640 score is the threshold for getting approval on an FHA mortgage loan.  And 640 can get you a car loan at close to 10% interest-especially if you shop very carefully.  

I urge people, if as all possible, to wait three years after bankruptcy to finance a car. (In three years, your credit score after bankruptcy can be well above 700.) But for people who have been dragging bad credit around for years, people who’ve been paying upwards of 20%, a car loan at 11% or 12% would look mighty good. 

Let me put it another way.  One third of the country have credit scores below 640.  Charge offs, collections, repossessions!  Nearly everybody in that group would see their scores improve if they filed bankruptcy–but most of them wait until they get court papers, or even until they get garnished.  

Bankruptcy is in the law to help you–and to help the country. The country is better off if you can fix your credit.  The country is better off if you can get a car loan at a payment you can afford.  The country is better off if you can save up and buy a house.

What does a low credit score mean?  A low credit score means the lenders know you need to file bankruptcy.  And that you are going to, sooner or later.  The only person who doesn’t know it, is you.

Why wait? 

Your credit score after bankruptcy is your road to a better life.  





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Aug 2014

Sticky: How Soon After Bankruptcy Can I Get a Mortgage?

Posted by / in After Bankruptcy, Blog / 4 comments

Good News:  Fannie Mae Announces New Shorter Waiting Period for After Bankruptcy Mortgage.

Here’s the most important question for people who file bankruptcy because they can’t make their house payments:  How soon can I buy a house again?

Since the housing crisis, there have been two waiting periods:  Two years after the bankruptcy; but three years after the house is foreclosed.  (As long as “extenuating circumstances” led to the bankruptcy.  With no “extenuating circumstances,” the rule is and was seven years.  That’s the penalty for “strategic default.“)

That three years after the foreclosure was a big stumbling block to a lot of people.   Often the house did not foreclose for a year or more after the bankruptcy was discharged.  (That’s why I tell people, don’t move out!)   So that three year waiting period turned into four or five years.

Bette Moose mortgage lender

Bette Moody, with Primary Residential Mortgage, checked behind me to make sure I read the new after bankruptcy mortgage policy right

On July 29, 2014, Fannie Mae announced a new policy.  From now on, the two year after bankruptcy mortgage rule applies.  But if you discharge the mortgage debt in your bankruptcy, you do NOT have to wait three years after the actual foreclosure.

This means hundred of people I know, and tens of thousands nationally, can buy a house again a year or two sooner.  That’s fair to them, and good for the country too.  It’s fair, because it’s not the homeowners’ fault that the mortgage companies don’t get around to foreclosing.  And good for the country, because more houses will be built and sold.


At least some lenders think this rule only applies if you list your house in your bankruptcy as surrender.  Those lenders say, if you listed it as keep–and then change your mind–the three year rule still applies.

PS  I want to thank John “the Ionizer Guy”-one of my blog readers.  John was the first person who pointed out this new after bankruptcy mortgage rule to me.  (Google says a thousand people a day read one of my blogs.)

And also Bette Moody.  Bette is a branch manager for Primary Residential Mortgage.  She checked behind me, to make sure I had this right.



PPS  A month after I first posted this, the Washington Post ran a good summary, The New Federal Guidlines–The Washington Post

PPPS  A friend, who filed bankruptcy with someone else, told me she got an after bankruptcy mortgage approved by George Mason Mortgage, while still living in the old house, included in her bankruptcy, that had never been foreclosed.

PPPPS–December 2015.  Heard today from Jake and Donna.  They filed Chapter 7 bankruptcy with me in the Summer of 2011.  Afterwards they tried to work out a loan mod with Bank of America.

Spring 2012, they gave up on trying to talk to Bank of America and moved out.  Please foreclose, they told the bank.  The house sat vacant for three and a half years.

While the house was vacant, and Bank of America doing nothing about it, Jake and Donna, got on with their lives.  They rented for two years; then this summer they bought a new house.  Just over two years after they moved out of the house that was discharged in their bankruptcy.

Jake contacted me, just to let me know Bank of America is finally foreclosing on the old house, January 8, 2016.  


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