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Did you know that even after the loan is repaid, banks and other creditors may continue to list the loan on your credit report? When your credit report shows a loan that hasn’t been paid, your credit rating can take a huge hit. In some cases, that bad credit rating may also mean that you will have to pay additional interest in some cases or that you may not be able to get credit from other lenders.
A new bill proposed by Senator Sherrod Brown called the ‘Fair Consumer Reporting in Bankruptcy Act of 2015’ would prevent banks and creditors from listing debt on a consumer’s credit report after the debt has been cleared with a bankruptcy discharge. Are.
bill details
The new bill (if passed) would require creditors to contact a consumer reporting agency after paying off the debt. If that debt is discharged in bankruptcy and is voided, creditors must report the debt as such.
How big an issue is this? Right now, it is estimated that one in five consumers have an error on their personal credit report. Personally, we think this number is very low and is actually above 50%. This means that many credit reports contain major mistakes, and even if you think your debt has been repaid and cleared, it may not be.
In addition to the fact that you may have a harder time getting approved for the loan, neglecting to report the loan as “zero” can also mean that the consumer has additional obligations due to the debt to income ratio. Additional interest will be charged. Sadly, many consumers do not bother to check their reports after paying off the loan. The new bill would protect consumers who have declared bankruptcy and, therefore, have the right to have that debt erased from the credit record.
in the meantime
The bill described above hasn’t yet been approved, but there are a few things you can do to make sure that any debt you pay off shows up on your credit report. First, always check your credit report to make sure that loans paid off are accurately reflected on that report.
If you spot any discrepancies in your credit report, it is up to you to dispute the loan. Second, keep on top of your credit report by checking it once per year. You never know if the information reported is true or not, and it will only benefit you to stay on top.
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