Your Credit Score

One of the most common things we get asked about is how Bankruptcy will affect your credit score.  Well the short answer is “it depends.”  However, the following will address this question by first addressing how credit scores are calculated and then addressing some general guidelines for Bankruptcy and your credit score.

How your score is calculated

Your score is calculated by the following factors and percentages:

  1. Payment history (35%)
  2. Amount Owed (30%)
  3. Length of Credit History (15%)
  4. New Credit (10%)
  5. Types of Credit (10%)

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Bankruptcy and your score

Most people who come to see us: (1) have a payment history that is less than ideal and (2) high amounts owed (as compared to their available balances).  As you may be able to guess, this means that their score is already pretty low.

Filing Bankruptcy fixes both of these items.  When the Bankruptcy debt is discharged then all the negative late payments are deleted from your account and the amount owed goes to zero (the positive). The Bankruptcy filing is then reported on the public records section of your report for 7 to 10 years (the negative).

This means that people can start to re-build their credit right after their discharge.  They can do this by obtaining new credit (pretty easy to do) and paying it on time (also easy to do if you do it).  By doing this most people can get a score back up to 650 within 2 years and 720 within 3 years.  Scores really don’t go above 720 for anybody with the Bankruptcy public record on their report.

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