Credit Report vs Credit Score

“What’s the difference between a credit report and a credit score?”   That’s a very common question we hear from our clients, and it’s easy to see why so many people confuse the two, since sometimes creditors use the terms interchageably.

A credit report is a detailed list of your debts and payment histories with individual creditors.  For example, if you have a car loan and a credit card, both would be listed in your credit report.  If you regularly make late or incomplete payments to any creditor, that information will appear month-by-month so that potential creditors looking at your report can make a decision about whether to extend credit to you.  Different creditors might put different weight on individual items, depending on their individual credit standards.

A credit score is a number that the credit reporting bureau believes represents your credit on the whole.  Some creditors rely on credit scores rather than credit reports because they are calculated by the credit reporting bureau based on all the information available, and don’t require the same type of line-by-line scrutiny that credit reports might.  For example, if you miss two payments on a loan, your credit report will reflect those payments and the months they were missed.  A credit score, on the other hand, would just be reduced by a set amount to reflect the missed payments.  credit dial

Here’s the catch: credit reporting bureaus (like Equifax, Experian and TransUnion) don’t want you to know how they calculate credit scores, because they are a proprietary financial product available for sale.  So you can make a guess about how certain items will affect your credit score, but you won’t know for sure until you see the score change.  Reporting bureaus claim they are using their knowledge and data analysis to give creditors the best guess available about your creditworthiness, which may be true.  But it’s difficult or impossible to dispute an incorrect score because of the secretive, proprietary formulas used to generate them.  Because we know that many credit reports contain errors and misinformation, it’s hard to know where your score should be and how to change it unless you are regularly monitoring your credit reports.

For bankruptcy purposes, we want to look at your credit report rather than your credit score, because we want to be as accurate as possible about who your creditors are and how much you owe to each.  If you haven’t had contact with some creditors in a long time, your credit report might be the most accurate record we can find to make sure all of your creditors receive notice of your bankruptcy filing.

We’re always glad to help our clients figure out the difference between credit reports and credit scores.  Feel free to give us a call if you have questions!

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Credit Reports: Get Them, Monitor Them!

credit reportCredit reports and scores are used for the purpose of advising a lender of the risk factors in lending a person money or advancing credit.  It is very important to maintain the accuracy of your credit reports.  Most commonly credit reports are incorrect after a bankruptcy filing.

Our office recommends that you check your reports at least once a year, if not twice a year.  So long as you are not requesting your credit “score,” you can view the report to check for any errors once in a twelve month period from Transunion, Experian and Equifax.  Free credit reports from all three credit reporting agencies can be obtained at:www.annualcreditreport.com.

 

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Benefits of a Chapter 13 over a Chapter 7 Bankruptcy

Chapter 13 bankruptcy is a payment plan, where you, the debtor, pay back a percentage of the debt you owe to your creditors over a period of 3-5 years.   Chapter 13 can provide some very important added benefits that are not available in chapter 7.  An experienced bankruptcy attorney can help you determine whether Chapter 13 is right for you.

Here are some common reasons why chapter 13 might be your most beneficial option:

  • Chapter 13 can help save your home.  In many instances, second mortgages can be stripped or eliminated through a chapter 13 bankruptcy.  This can enable families to stay in their homes by only having to make payments on the first mortgage.  Also, you have up to five years to catch up on any arrears, or missed payments, to get your mortgage current.
  • If you are repaying a car or truck loan, the interest rate may be lowered in a chapter 13.  Also, in some instances, the amount to be repaid on the loan can be lowered to the current market value of the vehicle.
  • Chapter 13 may allow you to keep valuable assets that might be lost in a chapter 7.
  • Some types of debts that are not eliminated in chapter 7 can be discharged in chapter 13.
  • If you are having trouble repaying tax debt, chapter 13 can sometimes offer relief.  Payments may be lowered, and penalties and interest can be reduced or eliminated.

If you are interested in learning more about whether Chapter 13 might be a good option for you, contact a bankruptcy attorney today.

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