What Will Bankruptcy Really do to my FICO Score?
When people face the prospect of filing for bankruptcy in Queens, one of their top concerns is often how bankruptcy will affect their FICO score. FICO, or Fair Isaac Corporation, scores are credit scores the majority of lenders use to determine your potential credit risk. The myth surrounding bankruptcy and ruined credit scores is well established, but not fact. Bankruptcy has the possibility to lower your credit score, but this is by no means the bottom line. Not only are many other factors at play, but your score may actually improve when you file for bankruptcy.
A few years ago, FICO gave out information regarding how bankruptcy and other credit-related mistakes can affect your credit score. Up until then, many were in the dark when it came to understanding the ups and downs – and more importantly the whys – of the mysterious FICO score. The corporation gave some scenarios describing how much a hypothetical person’s FICO score would drop if they did things like max out a credit card, go through foreclosure, or file for bankruptcy. The impact of something like a bankruptcy depends on an individual’s complete credit profile. Someone with a high, or good, score will see a sharper drop than someone whose score is already low.
So those who think that filing for bankruptcy will ruin their credit need to look closely at their current financial situation to determine if this is really true. If you have made continuous late payments or maxed out your credit cards, your credit score is already being chipped away over time. Filing for bankruptcy will not only settle your debt and stop your score from continually falling, it may even improve it. I have seen scores go up by as much as 135 points after a bankruptcy.
And after your file for bankruptcy, you can immediately take steps towards improving your credit scores. Get a secure credit card and make all your payments on time. You can then apply for a traditional credit card and continue to help your FICO score. Be sure to check your credit report to ensure that any accounts that weren’t part of your bankruptcy filing are not being reported with a bankruptcy status. And make sure that your bankruptcy is removed from your credit report once it is eligible (the amount of time is determined by the type of bankruptcy you file: Chapter 7, Chapter 11, or Chapter 13 bankruptcy). By making healthy financial choices and keeping tabs on your bankruptcy filing, you can quickly and effectively get your life back on track.
And remember: before making a quick judgment about bankruptcy and you FICO score, make sure to arm yourself with the proper information. You can estimate your FICO score range by filling out a quick questionnaire on the company’s website. And if you are not sure if bankruptcy is right for you, contact a bankruptcy attorney in Queens that can help you make a decision that is based on your financial profile, not generic information. Call the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.
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