What would you do if you noticed an error on your credit report? You would probably try to get it corrected? But what if that error actually worked to your benefit? An ex-bankrupt reader from Ottawa recently sent in this email to describe his or her situation:
“I checked my credit report from Equifax after sending the discharge info to them, and one of the credit cards doesn’t show as in bankruptcy. It shows as R1, with no missing payments with the date of last action being the date of the last payment I sent them (which was the month before I declared bankruptcy).
It doesn’t have the “Notice – included in bankruptcy” It shows no money owing, but does show the last credit limit. The company is Capital One. And I noticed that to get a secured card from them, one of the conditions is that you can’t have an account with them in bad standing for the last 12 months. Is this a way for them to make sure they get your business after you discharge the bankruptcy? Or is this them being incompetent?
In a way, it makes my report look better – I only have 3 cards covered by the bankruptcy, so should I get it changed to show R9 or take advantage of what they are doing?
A second question – does it help that I have 5 cards showing with a status of R1 (all of them older cards that are closed except for the Capital One card) and only 3 with R9 or am I just fooling myself? ”
– Out of the loop in Ottawa
First of all, congratulations on getting a copy of your credit report! Many people fail to do this. You should also get a copy of your credit report from TransUnion Canada, if you haven’t already. Although they are a distant second player in the credit report scene in Canada, some companies use TransUnion, or both TransUnion and Equifax. I’ve noticed that my cell phone contract from Fido appears on TransUnion, but not on Equifax.
Second of all, I’m not sure if you’ve sent in a copy of your Certificate of Discharge to both of the credit bureaus. This is not automatically done by anyone, so you need to do this part yourself. I’m also not sure how long it’s been since you were discharged from your bankruptcy. But, I’ve noticed that some information on my own credit reports took a long time to get updated. I tried to correct or remove all incorrect or unverifiable information. Some of it was done easily, some not so much. In some cases, short of hiring a paralegal or a lawyer, there was no way to get some of it corrected or removed, but since it was only a few months away from being purged from my credit reports, I let it go.
Now, I want you and all of the readers here to realize that I am NOT a trustee or a lawyer. I am not offering legal or financial advice here. I’m just offering my opinion and some of my own personal experiences, so take from it what you like. I do not take any responsibility for any outcomes.
Correcting Errors On Your Credit Report
You should ensure that your credit report is as accurate as possible. Inevitably there will always be some sort of errors though. Some will eventually get corrected through an update. Some will be corrected to the point that they’re more accurate, but not 100% accurate (and you can decide if it’s worth pursuing – especially if the error is minor or will soon be purged from your credit report based on the amount of time that has passed).
Some Information On Your Credit Report May Take A While To Automatically Update
In your case, the Capital One credit card that shows as an R1 was probably an unsecured credit card that was in good standing prior to your bankruptcy. Without knowing how long it’s been since your discharge, or if you’ve sent in a copy of your Certificate of Discharge, it’s hard to guess as what might happen with this. You mentioned the credit report shows the date of your last payment, but I’m not sure if this was a partial payment or if you paid off the balance in full. This will make a difference too.
Make Sure You Send In A Copy Of Your Certificate Of Discharge To Both Credit Bureaus
If there hasn’t been a lot of time since your bankruptcy was discharged, it could be just a matter of time for this to get updated. I’ve seen some of my accounts take months (and sometimes more than a year) to get updated. And if you haven’t sent in a copy of your Certificate of Discharge to Equifax and TransUnion, you should do that right away. That might correct or update some of the information right away.
Should You Correct Wrong Information That’s Actually Beneficial To You?
On the other hand, it’s quite serendipitous how that mistake is showing up on your credit report, because it makes you look good! From an integrity standpoint though… a credit report should be as accurate as possible. If this error does’t correct itself, it’s up to you if you want to notify Capital One and/or Equifax about it. Certainly, an R1 looks infinitely better than an R9. But, even if it stays as an R1, the fact that you have a bankruptcy showing on your credit report will likely counteract any good that would come of that R1 on your old credit card.
And in the event you applied for any credit, a lender would notice that the card was issued PRIOR to your bankruptcy. And in Canada, all credit cards must be surrendered when you declare bankruptcy, even if they have a zero balance. You are not allowed to have any credit during the time you are an undischarged bankrupt. So, a lender with a keen eye would notice that this was issued prior to your bankruptcy and likely assume that you no longer have this card, especially if there has been no recent activity reported on it.
Getting A New Secured Credit Card Now
You mentioned that you were looking into the Capital One secured credit card. Good for you that you’re looking into getting a secured credit card to start building up new credit after your bankruptcy has been discharged. The sooner, the better! Personally, I’ve never been a fan of Capital One. Some people call them “Crapital One.” And it’s debatable as to how a Capital One card may reflect on you when see in your credit report. Then again, nothing can be worse than a bankruptcy, so that may be a moot point.
Since it’s likely been less than a year since your discharge – based on the fact you mentioned that you cannot have an account in bad standing with Capital One in the last 12 months – I think you should look at the alternatives. There are two other excellent secured credit cards that are very popular with Canadians who are establishing or re-establishing their credit: the Peoples Trust Secured MasterCard and the Home Trust Secured Visa. I have written on both quite a bit.
Avid readers of this blog will know that I’m a big fan of both of these cards. I have both of them and use them regularly. If you can, get one of each, with at least $1000 credit limit. Of course, that means you will have to send in $1000 to each of them. But their minimum credit limit is only $500, so you can start with that and add more later. Remember, it’s easy to max out a $500 card these days, so be careful. A card that’s maxed out, or close to being maxed out – even if paid on time – will not be good for your credit score. Or if you can afford to send in more, you can do so. Just don’t set up a credit limit that’s too high, based on your income. Otherwise, the debt to income ratio, or even the amount of credit available to you based on your income may work against you.
Old Debts That Were Paid On Time Prior To Bankruptcy
Lastly, you mention that you have several older cards that are now closed, but had an R1 rating. That’s excellent that you kept them paid up. I’m not sure what your circumstances were for declaring bankruptcy, but it sounds like you were always able to pay your credit card bills every month – be it the minimum payment or paid in full. Maybe you just realized that with the amount of debt you had, you would never be able to pay it off, and that was your reason for declaring bankruptcy. But if any case, I’ve heard that it makes you look better if your old debts, prior to going bankrupt, were paid on time.
Of course, the bankruptcy itself will hurt you, but in future (and the more time, the better), along with a one, two or more years of newly established, post-bankruptcy credit, those old accounts that were paid on time prior to the bankruptcy may have a positive influence. It shows you have had a long history of on-time payments. It’s better than someone who had a spotty payment history prior to bankruptcy. But in any case, everyone needs to have a perfect payment history AFTER bankruptcy.