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DEBTOR EDUCATION SERVICES
Hoglund, Chwialkowski
& Mrozik
offers
the debtor education course to help you understand the world of credit reports,
credit scores, credit bureaus, credit repair, budgets and identity
protection. The consultation fulfills the debtor education
as required by the bankruptcy code. This consultation may help you with the following:
Improving
your credit report by correcting wrong or missing information that
can lower your credit score and cost you money;
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Avoiding
common consumer mistakes that can tarnish your credit record;
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Avoiding
credit-related scams and identity theft;
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Taking
advantage of federal laws that protect you and your credit record;
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Budgeting
basics; and
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Where to
turn for more help or information.
Importance of
Credit
Have you ever
applied for a loan, credit card or other credit? Have you ever
had your insurance rates rise? Have you ever been turned down for
an apartment? Did you ever not get a job you thought you had
locked up? If the answer is yes, then you may have learned why
credit is important the hard way. Having good credit will allow
you to answer yes to the questions.
What most people
do not realize is that landlords, insurance companies, banks,
credit card issuers and employers check your credit record. They
check your credit record by obtaining your credit report which
allows these companies insight to your spending habits, payment
history, possible lawsuits and any bankruptcies declared.
Your good credit
will allow you to maintain a happy, healthy and financially fit
life. Companies use your credit score and credit report as a
future indicator of your credit worthiness. Your credit report
allows companies to see important information about your past and
present payment patterns. Your credit report tells the story of
your ability to pay your bills on time and how extended you are on
your current loans. Paying your bills on time in the past is a
good indicator to a lender that you will continue to pay your
bills in the future. Paying your bills late or not at all is a
good indicator to a lender that you will continue to pay your
bills late or default on a new loan or rent. Landlords may shy
away from renting an apartment to a person who fails to pay his
bills due to fears the renter will not pay the rent. Also, an
employer may not want to hire someone who does not demonstrate
financial responsibility and maturity.
Credit Report
Basics
The companies
that collect information about your financial affairs and provide
that information to banks, credit lenders, employers and insurance
companies are called credit reporting agencies or credit bureaus.
Banks, credit lenders, employers and insurance companies use the
information to screen you for loans, credit cards, employment and
insurance policies. The three major credit bureaus are Equifax,
Experian and Trans Union. The credit bureaus are regulated by the
federal Fair Credit Reporting Act.
Most credit
lenders, banks and the services which provide background checks
for employers and insurance companies are registered with all
three bureaus. Most credit issues are filed with all three
bureaus. Therefore, it is important to check your reports each
year to verify your information is correct.
Credit Repair
The credit bureau
may not accurately reflect your most recent
discharge; therefore, you
should send them a copy of your
discharge notice and the
schedule of creditors. Furthermore, you may want to inform the
credit bureaus of the following information (the credit bureau
does not have to add this information but often will):
•
Current employment
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Current residence
•
Current phone number
•
Date of birth
•
Checking account number
Another strategy
for building your credit record is to make sure everyone that you
pay on time reports this information to the credit bureau. If you
ask someone you make monthly payments to report this to the credit
bureau, this may improve your score.
Once you have
established that the current information on your report is as
accurate as possible, your next goal is to improve your score as
much as possible with new credit references. A methodical
approach to credit will yield the best results.
Budget Basics
Establishing a
realistic household budget will help you realize a clear idea of
how much debt payment your budget can handle. A budget allows you
to realize how much money is coming in and how much money is going
out each month. A sound budget is the key to rebuilding your
credit.
Rebuilding Credit
Evaluate the
credit offers you receive based on the type of credit, interest
rate, grace period, annual fees and any other terms so you know
exactly what you are obligating yourself to. This process is
essential because your application process should remain focused.
A large number of credit inquiries caused by a flood of
applications by you can cause you to be rejected by creditors who
would otherwise approve you. Be selective!
A starting point
in obtaining credit is getting one credit card. You may only
qualify for a secured card but whether it is secured or unsecured,
you can use it to build your credit. Once obtained, make a small
purchase each month (e.g. $25) and pay it off when the bill
arrives. By paying the balance due and not carrying a balance
over to incur interest charges shows prospective creditors you can
manage your account.
Once you have
established yourself with the one card, you might be anxious to
apply for many more cards. However, you should be careful in not
getting too carried away. Ideally, you should carry one or two
bank credit cards, maybe one department store card and one
gasoline card. Try not to charge everything on your bank credit
card and not use your department or gasoline card. When creditors
look in your credit file; however, they want to see that you can
handle more than one credit account at a time. Do not build up
interest charges on these cards, but use them and pay the bill in
full.
Another method to
rebuilding credit is to apply for a small loan at your bank.
After using a credit card for a time, obtaining a small consumer
loan and paying that on time will improve your credit score.
Please note, whether it is a new loan, car loan, home loan,
student loan or credit card, make sure you are on time with all of
your payments. You must pay all of your bills on time after a
bankruptcy to build your credit effectively.
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