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Mortgage company reporting to credit agencies after Chapter 13 Discharge

Discussion in 'Refinance' started by kczoe, Apr 3, 2012.

  1. kczoe

    kczoe LoanSafe Member

    Chapter 13 bankruptcy was filed in 2008 and completed and discharged in June 2011. As I was would like to refinance my mortgage a year out from my discharge, I checked credit scores (hoping to see an increase since last checked in December 2011), but they dropped over 50 points!!! I'm trying to figure out why. Everything is being paid on time. It looks like my mortgage company is reporting my account as derogatory and not showing any current information (I have never been late on a payment to them). Has anyone else experienced a drop like this and have any suggestions of what to do???

  2. Sweetjuly

    Sweetjuly LoanSafe Member

    Hi kczoe,
    I am very big on monitoring our credit as well. Our scores were over 700 1 1/2 year after bankruptcy filing, which was a shocker!! Our scores have now dropped to low/mid 600's even after reestablishing our credit. I think the biggest thing that affected our scores were the number of inquiries we had due to us trying to reestablish our credit by applying for merchant accounts, credit cards etc....I noticed after being approved for several credit cards, our scores went down instead of up, but over time paying on time should make up for all the inquiry dings on our credit. This may or may not apply to you, but I just wanted to share our case.
  3. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Hey Kczoe,

    Sweetjuly makes an excellent point and this may be the reason you have experienced a decrease in your credit score.. Your mortgage should not have anything to do with the decrease as they are no longer reporting the debt or any current information about the loan after it was fully discharged..
  4. kczoe

    kczoe LoanSafe Member

    Thanks for your reponse. I have only had two inquiries in the past five years, one around July 2011 and the other in Decmeber of 2012, so I'm not sure that is the cause of a 50 point drop in the last three months. There have been no other inquiries in the past four years. The mortgage is the only thing in my name and I wish it would report everything as current, instead of nothing. This is so discouraging.
  5. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Yes I agree that would be quite a big drop for only two credit inquiries in the last year. Unfortunately, after mortgages are discharged it is almost as if you are renting the house as it will no longer be reported to the bureaus or benefit your credit score even though you are current on the loan..
  6. kczoe

    kczoe LoanSafe Member

    Does that mean if I don't make payments and walk away from the house they can't report it? This really makes no sense to me as the mortgage was current before, during, and now after the Chapter 13 discharge.
  7. RyanJP

    RyanJP LoanSafe Member

    You are correct, the bank cannot make a new negative report to your credit report if you simply stopped paying and walked away, assuming that you did not reaffirm the mortgage during the bankruptcy proceedings.

    However, they would be forced to file foreclosure at some point. That would be a public record and would show up on your credit report.

    You'll have to find out why its derogatory. If you were never late with any payments, it should have been reported as discharged in bankruptcy, which would be a derogatory (obviously) but all the damage would have been done at the discharge, it shouldn't be suddenly beginning to effect it now.
  8. kczoe

    kczoe LoanSafe Member

    RyanJP
    Thanks for your input. I am just at a loss as to what, other than possibly the mortgage company reporting something different than before, could have caused such a large drop in three months. This was a Chapter 13, so I didn't reaffirm nor did I know I had to reaffirm. It has been 10 months since discharge and almost 4 years since filing, but the scores were so much better 6 months after disharge and nothing has changes so it just does not make any sense.
  9. RyanJP

    RyanJP LoanSafe Member

    What is your credit utilization like? Did you maintain any credit cards throughout the process, or did you pick up any new ones? If you made a large purchase and you went from using 10% of your available credit up to 80% of your available credit, that could be a significant hit.
  10. kczoe

    kczoe LoanSafe Member

    I had no credit utilization at that time. No new cards, no large purchases, no changes. Vasically everything stayed the same. Had two inquiries since discharge looking for better mortgage rate. Was told to wait for one year postdischarge for FHA loan. Transunion score when checked in December 2011 was 641 and when I just checked on April 2 was 581. I am baffled and discouraged.
  11. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Ryan definitely has sound advice about your situation and the reporting of your account if you end up in foreclosure.. I'm just as baffled as you and cannot think of any reason why your credit would have taken a hit given your circumstances..
  12. RyanJP

    RyanJP LoanSafe Member

    Looking for a bit of clarification... You said you had not credit utilization at the time. Are you referring to when you checked your score six months ago and it was higher, or when you checked on April 2nd?
  13. kczoe

    kczoe LoanSafe Member

    I have had no credit utilization (aside from paying my mortgage) in the last five years since filing the Chapter 13. As it was a 3-year Chapter 13 plan, my Trustee paid my creditors through the plan that I successfully completed. There are only two inquiries in the last year (mortgage lenders). Could my current mortgage servicer notice those inquiries and do something to make my score drop so that I would not be able to obtain a new mortgage? Just a thought!!!

    Ryan, I do appreciate your help, as well as Evan's help.
  14. RyanJP

    RyanJP LoanSafe Member

    With the mortgage discharged in the bankruptcy, there's really nothing they can do to further hurt your credit OTHER than filing for foreclosure.

    Do you have any late pays on your utility bills? Did you get a post-paid cell phone? I assume you don't have an auto loan based on your no credit use statement. :) I'm just shooting in the dark now thinking of things that can effect your credit score, however minutely.

    Do you still have a copy of the report from December? You'll probably have to go line-item by line-item and compare it with the April 2nd and see what exactly changed.
  15. kczoe

    kczoe LoanSafe Member

    I just have the scores from December that were sent to me by the mortgage lender that said I would have to wait one year postdischarge per FHA guidelines. I do not have the full December report. I have paid everything for the last five years on time, utilities, etc. It is so frustrating because there is no one to contact to get an explanation.
  16. RyanJP

    RyanJP LoanSafe Member

    Here's an idea... Sign up for one of the free credit score sites. Credit Karma will give you your approximate Transunion score, and Credit Sasame gives you the Experian score. Both sites will give you some feedback on what is hurting or helping your score.

    Do not confuse these with "freecreditreport.com" or anything similar. The sites I referenced above are 100% free and will not give you your actual credit report - only an approximation of your score. They make money by selling advertising space to credit card and mortgage companies that want you to apply with them, but none of it is mandatory for membership on the site.
  17. kczoe

    kczoe LoanSafe Member

    Thanks for those sites. I went to Credit Sesame and put in my information and Credit Sesame could not find the mortgage on my credit report. As I suspected, sometime within the last three months the mortgage servicer must have stopped reporting any current payments, thus the change and major, major drop. I cannot think of anything else that could have caused this.
  18. RyanJP

    RyanJP LoanSafe Member

    In theory, the servicer should have stopped reporting immediately after the court accepted your petition to NOT reaffirm the mortgage.

    Did you find the score to be close with what you were told on the 2nd?
  19. kczoe

    kczoe LoanSafe Member

    I'm unsure about what you mean when you say petition NOT to reaffirm. This bankruptcy was a Chapter 13 not a Chapter 7. I was never given an opportunity to reaffirm anything.

    The score on Credit Karma is very close to what I pulled up on the April 2nd. The scores I have from December were pulled by a Mortgage lender and I have them in writing and they are sooooooooo much better.
  20. RyanJP

    RyanJP LoanSafe Member

    Sorry, I don't know what I was thinking when I said "petition not to reaffirm." Too busy thinking about Brewer's Opening Day. :)

    When you filed your BK, you would have indicated whether you intended to keep or surrender your home (or purchase it outright.. but who does that?). If you opted to surrender the home, then the servicer should have stopped reporting anything, positive or negative.

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