Editorial Policy

Bankruptcy casts shadow on credit reports for years

Erica Sandberg

March 1, 2016

QHi Erica,

I want to rent a property, and the landlord says he needs to do a credit check. I was made bankrupt eight years ago. Will the landlord see the bankruptcy? — Paula

ADear Paula,

The answer depends on the type of bankruptcy you filed.

Most indebted people choose Chapter 7, which is listed in the public records section of a consumer credit report for 10 years from the filing date. Therefore, if you erased your balance sheet with this form of bankruptcy protection, it still has a couple of years left on your credit reports.

Before it drops off, a landlord — or anyone else who checks your reports — will see the notation. However, the accounts that you discharged should not be showing up in your credit file. Negative data, such as late payments and defaults, can remain listed for only seven years from when they were first posted.

On the other hand, a Chapter 13 bankruptcy will stay on a credit report for seven years, and the time clock also starts the date of the filing. If you used this type of bankruptcy, which is a court-administered repayment plan, no one but you and those you inform will ever know of the filing. A Chapter 13 bankruptcy notation should have been removed from your credit reports about a year ago.

Pull your credit reports now to see what comes up though. Unless landlords are using special tenant reports (which contain criminal and eviction records, as well as your financial history), you’ll see exactly what they see.

There are three major credit reporting agencies in the United States — TransUnion, Experian and Equifax. You can get each report for free via www.annualcreditreport.com. Access all three, since you don’t know which report a landlord will check.

In most cases, the reports issued by the different agencies will contain the same information, but occasionally there are differences. Some creditors report only to one or two agencies. Credit report errors also happen, but these are pretty easy to resolve when it’s a simple timeline issue. For example, if you filed Chapter 13 bankruptcy and it’s still on your report, file a dispute with the reporting agency. Point out the date you filed and that you need the bankruptcy removed. The error should be rectified in about 30 days.

Do not try to dispute a Chapter 7 bankruptcy though. The agency will not purge the notation until it is legally bound to do so. You’re stuck with it for a little while longer. But try not to worry too much. What you did eight years ago tends to be far less relevant than what you’ve been doing with money and credit in the past few years.

If you’ve been charging with a credit card or two (or more) and have been paying on time and keeping your debt well below the credit line, that’s fantastic. You’re taking steps to rebuild your credit. That activity has been noted on your credit reports and will look good to landlords. Satisfied loans also will reflect favorably on your credit. Why? Because you’re showing that you’ve been adhering to the terms of a contract and are not in over your head — both highly valued qualities.

In the event that a landlord does ask about the bankruptcy, be prepared to discuss it concisely, emphasizing that it was a long time ago and you’re in a better financial position today (presuming you are). Try not to get flustered. Focus on your assets. A bankruptcy of any kind can be used to disqualify you as a would-be tenant, but you may be able to offset the “Sorry, we went with someone else” response by proving that you’re stable and responsible today.

Got a question for Erica? Send her an email.

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