J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

Lots of people in the Houston and Harris County, Texas area, and millions nationally, are having a difficult time getting credit and getting their credit reports re-established because of the recent Foreclosure Crisis and the Great Recession, according to a recent report by the National Consumer Law Center (NCLC), authored by Chi Chi Wu. The report calls these events "situational circumstances or “trembles” within a consumer’s life that are often responsible for the delinquencies, defaults, and foreclosures – not bad character, but bad luck."

The title of the report is "Solving the Credit Conundrum: Helping Consumers' Credit Records Impaired by the Foreclosure Crisis and Great Recession."  The report highlights 5 problems with credit reporting that could be holding you back; (1) lenders or mortgage servicers that are reporting short sales as foreclosures; (2) mortgage servicers and lenders that are trying to collect deficiency balances after a short sale or a foreclosure (when there is no deficiency due); (3) reporting the entire balance of a mortgage as still due, after a foreclosure (we see this a lot when we pull credit reports before we file a bankruptcy for someone); (4) credit reports that are not reflecting the terms of a loan modification; and (5) reporting loan modifications in a way that makes it look like the borrower is only paying partial payments, when they are paying the full amount asked of them.

If some or all of these issues have happened to you, don't take it "lying down." Do the best that you can to make the credit bureaus report the derogatory item or items accurately. Even if you don't want to purchase anything on credit anytime soon, your credit reports are increasingly important in today's society.

Your credit score can be used for such things as employment, renting a house or apartment, whether or not you qualify for insurance and how much your premiums will be, even how much you will pay for utility service. A poor credit score can literally cost you thousands and thousands of dollars.

The federal Fair Credit Reporting Act (FCRA) requires credit bureaus to use "maximum possible accuracy" in credit reports. You are entitled to free credit reports once per year from each of the major credit bureaus, as well as if you have been denied credit. Review your reports carefully, and dispute the erroneous items. If they won't fix it, and it causes you damage such as a credit denial, a higher interest rate, or higher insurance premiums or a job denial, you may have a cause of action or a lawsuit against the credit furnisher and/or the credit bureaus.

And if you are still suffering from debt problems, the quickest way to re-establish your credit, believe it or not, may be to consider filing a bankruptcy case, either a chapter 7 to discharge or cancel most debts, or a chapter 13 court-supervised repayment plan to pay what you can afford to pay, with the unpaid balance discharged. If you live in the Houston, Texas area or surrounding counties, call our office at 713-772-8037 anytime, 24/7 to make an appointment or to order one of our publications. 

Have you had any credit report problems due to the Foreclosure Crisis or the Great Recession? As the NCLC Report states, should the laws be changed so that derogatory items are removed sooner, say in 3 years? What do you think?

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