Keeping home... will its payments help reestablish credit?

[Midiman]

Filing Ch7 in two weeks. We're keeping the house since we've never missed a payment and currently aren't underwater. I know a secured credit card is the normal pattern to credit reestablishment, but what if we don't go that route? Does rebuilding one's credit always have to be "card" related? Since our 2001 vehicles are aging, would a dealership offer decent rates in a year or two based on our property payment history, or does the BK kill that idea?

Thanks

[BKDefender]

Your credit doesn't improve itself with age unless things start falling off. If you do not have any trade lines reporting that you are charging up debt and paying it down (with a credit card for example, or department store card), then your credit score will just stay where it was after bankruptcy for a few years. You really should apply for an get ONE credit card with $500-$1k balance, charge it up to no more than 60% of it's credit line, and then pay $125, charge $100, pay $125, charge $100 (alternating each month) for 6-12 months and you'll find your credit score will recover about 50-60% of what you lost when you filed BK.

Then in 1-2 years after filing BK you want to buy a car, your credit will have recovered to where they won't care much about your BK.

--William

[LSUTiger32]

Here's an idea, don't get a credit card because they are a big reason why a lot of us are here. Once your BK is closed some things will begin reporting again, especially anything you reaffirm.

Save money to buy a car and you can get a mortgage without credit by simply finding someone who will do manual underwriting and see that you are taking care of your finances now by NOT making the same mistakes you already made.

[keepinitreal]

...currently aren't underwater...

Before you file, make sure that the trustee won't want to sell your house to cash out your equity.

[mom2three09]

Unless you sign reaffirmation papers on your mortgage your mortgage company likely will NOT report your payments to them every month.

We are with BOA and are staying in our home (but did NOT reaffirm) and they are no longer reporting our payments to the CRA's.

[LSUTiger32]

Yeah you will have to reaffirm to get things reporting again. I just don't see why everyone thinks you HAVE to rebuild your credit by getting the very thing that was a likely contributor in landing you on this forum in the first place.

[Midiman]

Thank you all for replying...

Well, the house was never at risk. Our equity is down to 17k (from 350k in 07') and this state allows for 21k personal property prior to filing. We're also with BAC home loans. Can someone tell me what reaffirm means and how I'd go about doing that?

In our case it was the lack of medical insurance that put us in this position. The cards were the catalyst but I thank God we had them, AND the outrageous credit limits we were afforded.

[freshstartmi]

Yeah you will have to reaffirm to get things reporting again. I just don't see why everyone thinks you HAVE to rebuild your credit by getting the very thing that was a likely contributor in landing you on this forum in the first place.

Wholeheartedly agree!! We are on the Dave Ramsey plan -- NO CREDIT - That is why we are here in the first place!!

[BKDefender]

I don't think having a $500 to $1,000 credit line on a secured credit card is a bad thing. The key word is 'secured' credit card. If one puts 'skin in the game' it helps reduce defaults. One cannot rent a car in some cities without an actual credit card, a debit card is not always accepted. Rebuilding ones credit is important since it can reduce your monthly payment on auto an home insurance in states that do not prohibit that practice (it is allowed in Nevada to rate insurance based on credit score.)

--William

[Mi Bankruptcy]

I don't think having a $500 to $1,000 credit line on a secured credit card is a bad thing. The key word is 'secured' credit card. If one puts 'skin in the game' it helps reduce defaults. One cannot rent a car in some cities without an actual credit card, a debit card is not always accepted. Rebuilding ones credit is important since it can reduce your monthly payment on auto an home insurance in states that do not prohibit that practice (it is allowed in Nevada to rate insurance based on credit score.)

--William

exactly, the month after I filed I had to travel on business. The hotel I was staying at wanted a credit card. I turned over my debit card and they put a 350.00 hold on my account for possible incidentals.. Now keep in mind my company was covering the room. You need some credit.

[Midiman]

Can someone tell me what reaffirm means and how I'd go about doing that?

[SMinGA]

Reaffirm means you don't discharge the debt, but instead take on contractual obligation for the debt. Paperwork needs to be signed & filed with the bankruptcy court.

If you don't reaffirm, but keep paying - you should be able to stay in the house. If something happens and you need to give up the house, then you can walk away without owing since the debt was discharged. (But not the mortgage co's security interest in the house.) If you reaffirm, you owe the debt.

[Midiman]

Thanks...

So you're saying that I have to reaffirm even if our mortgage contract is 5 years old and we've never missed a payment or had a late fee?

[Mi Bankruptcy]

Thanks...

So you're saying that I have to reaffirm even if our mortgage contract is 5 years old and we've never missed a payment or had a late fee?

Some states allow ride through, meaning you don't reaffirm and continue living in the home and making payments. However, they will not report you payments on your credit report. Additionally, if you don't reaffirm and you miss one house payment they can start foreclosing.

The benefit is you are not legally responsible of any debt that you had on the house previously before bankruptcy. Search the forums there is some good threads.

Here is a thread that I started where I asked all the same questions about reaffirm

http://www.bkforum.com/showthread.php?t=29878

[flyinbroke]

exactly, the month after I filed I had to travel on business. The hotel I was staying at wanted a credit card. I turned over my debit card and they put a 350.00 hold on my account for possible incidentals.. Now keep in mind my company was covering the room. You need some credit.

Agree. I used a debit card on a trip last weekend. The "hold" did not come off my account once it was paid, and it does count as a reduction of available cash (which means though the money is there, your checks can bounce without padding.) I contacted them and they took it off.

I personally like the idea of having one, because "holds" don't affect a CC like they do a bank account.