I filed for Chapter 7 in 2004 and was told it would take seven years to clear me. However, my credit score still shows the bankruptcy and is keeping me from getting a credit card. I don’t understand this. It has been eight years, and I am still having trouble. How can I get this cleared? – Pat
There is so much misinformation about bankruptcy and credit reports that sometimes I wonder if it’s part of a conspiracy to keep consumers confused. And then I remove my tinfoil hat.
To set the record straight, a Chapter 7 bankruptcy will remain on a consumer’s credit report for a total of 10 years from the date of filing. Therefore, based on the time frame you provided, evidence that you discharged your financial obligations will continue to show up until some month in 2014.
I’m afraid that there is nothing that you can do to have the notice removed from your reports before that date. The fact is, when you used the legal process to relieve yourself of certain debts, you accepted its benefits as well as the drawbacks.
Among bankruptcy’s positives: As soon as you completed the paperwork, angry creditors stopped calling. I’m sure that was nice! You probably also experienced an amazing sense of emotional relief and — hopefully — a renewed ability to manage your necessary household bills.
On the flip side, however, your credit report began showing a big black mark on it, which will remain for an entire decade. This notation immediately began to negatively affect your credit scores (though they were probably low by the time you filed for bankruptcy). Moreover, anyone who pulls your report can see the notation and is free to make a poor judgment about you.
And that’s where we get the problem with you not qualifying for a credit card. Some issuers won’t consider you for one of their products, especially if you’re after an unsecured card.
Just consider the word “unsecured.” That means the bank is giving a loan or line of credit to someone with nothing acting as collateral. All they have to work with are your credit history and current financial status.
If your credit history shows that you’ve paid late, consistently over-borrowed, allowed accounts to go to collections, were sued for debts or filed for bankruptcy, it would stand to reason that the bank wouldn’t have a lot of faith in you being a good credit risk in the future.
Regarding your financial status, if you have a stable job where you earn a lot of money, you increase your creditability. More, if you have cash in the bank and own a good amount of property, you start to look a lot more attractive. If your current financial status is shaky, however, it’s a double negative.
So what can you do to get a credit card now? Your best bet is a secured credit card. With it, you put cash down as collateral. When you’ve identified the secured card that looks right for you, call the bank and ask them how they perceive a bankruptcy that’s nearly eight years old. Some will be forgiving of it because of its age, while others will not.
When you’ve found a taker, apply. Assuming you’ll be issued the card, use it responsibly. Charge a little each month and pay the entire bill immediately. At the end of two years, you’ll have added excellent borrowing and repaying information to your reports, and the bankruptcy will no longer be listed. All that will remain is the good stuff — at which point you’ll probably be eligible for an unsecured card that offers sweet rewards.
Got a question for Erica? Send her an email.