Debtor Education Services

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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
• Avoiding common consumer mistakes that can tarnish your credit record
• Avoiding credit-related scams and identity theft
• Taking advantage of federal laws that protect you and your credit record
• Budgeting basics
• 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 the hard way why credit is important. 

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 federal Fair Credit Reporting Act regulates the credit bureaus.

Most credit lenders, banks and the services that 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
• 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 someone you make monthly payments to will report this to the credit bureau, it 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 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 regarding the type of credit, interest rate, grace period, annual fees and any other terms so you know your exact obligations under the credit agreement. This approach is essential because your application process should remain focused. Creditors who would otherwise approve you may reject you if they see you’ve applied for many credit cards at once. Be selective! 

A starting point in obtaining credit is getting one credit card. You may only qualify for a secured card, but even so it can build your credit. Once you obtain a card, make a small purchase each month (e.g. $25) and pay it off when the bill arrives. When you pay the balance due and avoid carrying a balance over (which results in interest charges) prospective creditors will see you can manage your account.

Once you have established yourself with the one card, you may be anxious to apply for many more cards. However, you should be careful about getting too carried away. Ideally, you should carry one or two bank credit cards, possibly one department store card and one gasoline card. Try not to charge everything on your bank credit card and to not use your department store or gasoline card. When creditors look in your credit file, 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, you may wish to obtain a small consumer loan. Paying that loan on time will improve your credit score. Make sure you are on time with all of your payments, whether they are for a car loan, home loan, student loan or credit card. You must pay all your bills on time after a bankruptcy to build your credit effectively.