topic Re: bankruptcy & fico score in Bankruptcy

bankruptcy & fico score

monster_man — Sun, 31 Jul 2011 10:38:46 GMT

I looked through the FAQ, but I didn't see it mentioned. Is there an estimate of how many points a Ch. 7 will damage one's FICO score? I've looked at some of the messages on here and it seems like people are getting a 50 point jump when their bankruptcy comes off, but I've read elsewhere on the web that a Ch. 7 can take one's score down as much as 160-220 points. When one goes through one of those credit counseling places is the hit much less score wise? Just curious, I think that would be helpful for some of those trying to decide. I worked for a short time for a bankruptcy attorney, watching people at one of their most difficult times took a toll on me, so I wish knew this info before. I couldn't have passed it on, but maybe put in some literature or links that the attorney approved for the client would have been nice.

Re: bankruptcy & fico score

stanggt03 — Sun, 31 Jul 2011 17:06:30 GMT

If all your accounts update to IIB, you'll probably be betweent 540-600 coming out of BK. If you get a few tradelines going and garden, you can be 660-700 within 12-18 months. You can hit over 700 in less than 2 years if you play your cards right. I don't think there's exactly a set amount a BK hurts you, but I know you won't be able to get into the 800's until that's completely gone. As with everything, YMMV. This is what I've observed from watching others here.

Re: bankruptcy & fico score

beamMEup — Sun, 31 Jul 2011 21:17:48 GMT

Hi monster_man,

Welcome!

monster_man wrote:
I looked through the FAQ, but I didn't see it mentioned. Is there an estimate of how many points a Ch. 7 will damage one's FICO score?

Here's a quote from the education tab up top:

A bankruptcy will always be considered a very negative event by your FICO® score. How much of an impact it will have on your score will depend on your entire credit profile. For example, someone that had spotless credit and a very high FICO score could expect a huge drop in their score. On the other hand, someone with many negative items already listed on their credit report might only see a modest drop in their score. Another thing to note is that the more accounts included in the bankruptcy filing, the more of an impact on your score.

I've looked at some of the messages on here and it seems like people are getting a 50 point jump when their bankruptcy comes off, but I've read elsewhere on the web that a Ch. 7 can take one's score down as much as 160-220 points.

Remember that the impact of a BK decreases as it ages. So, a ten year old BK that is about to be "purged" off your CR, will have less of a negative impact than a brand new BK.

This is from another link from the Education tab up top:

How can I minimize the negative effect of a bankruptcy?
A bankruptcy is going to be factored into your FICO® score until it falls off of your credit report. While it may take up to ten years for a bankruptcy to fall off of your report, the impact of the bankruptcy will lessen over time.
If you plan to file a bankruptcy, here are some things you should do to make sure your creditors are accurately reporting the bankruptcy filing:
check your credit report to ensure that accounts that were not part of the bankruptcy filing are not being reported with a bankruptcy status.
make sure your bankruptcy is removed as soon as it is eligible to be "purged" from your credit report.
After a bankruptcy has been filed, the sooner you begin retaining or re-establishing credit in good standing, the sooner you can expect your FICO score to rebound. A good practice is to obtain a secured credit card and continually make all of your payments on time. As time passes and the impact of the bankruptcy lessens, you might apply for a traditional credit card and also continually make all of your payments on time.

Hope that helps a little!

Re: bankruptcy & fico score

monster_man — Mon, 01 Aug 2011 02:04:40 GMT

I"m in a bind. My brother is considering filing and because I did my stint working for my friend, my brother expects that I had all the answers. I never even considered FICO scores as part of the issue when clients showed up at the office. These people were more concerned about getting the collection agents off the phone, or the garnishments stopped, keeping their homes, etc. So FICO scores were the last thing on the mind. It makes sense though to be concerned. Thanks for the info.

Re: bankruptcy & fico score

monster_man — Mon, 01 Aug 2011 02:07:50 GMT

Thanks for pointing out the education link. I looked too quickly. This site does have plenty of information, I will make sure to go through that section.

Re: bankruptcy & fico score

beamMEup — Mon, 01 Aug 2011 04:27:53 GMT

monsterman,

That tab does have a lot of goodies - and it's great to ask questions here as well. There's a lot of helpful folks who will chime in - so don't be shy to ask about whatever's on your mind.

I can't answer the part of your question about credit counseling services impact on scores vs. BK, so hopefully you'll get some good feedback from others.

Two things that come to mind are, first) be sure you're working with a reputable company - there's a lot of services that aren't. And the disreputable ones can delay things tremendously.

And second, when you file BK (I assume he's looking at a CH 13 if there's a possibility he could work with a credit counseling company) there's the benefit of not continuing to have interest charged on certain types of accounts (credit cards come to mind). Sometimes that alone makes debts more manageable.

I think Suze Orman (IIRC) states that some credit counseling companies have the ability to come up with better repayment plans or better interest rates from OC's than individuals typically can come up with on their own.

As you've no doubt witnessed, it's always wise to do a free consult with at least two BK attorneys if you are considering BK. They will tell your brother the advantages and disadvantages, as well as if he meets the eligibility requirements.

Hope that helps a little.

Re: bankruptcy & fico score

carolina98 — Tue, 30 Aug 2011 04:48:58 GMT

I advise stop paying your bills if you're going to file because there is no benefit to paying them. I paid mine up to the day I filed and have no late payments on my credit report. I found out that, at least with TransUnion and Equifax, only the BK is reported, not the payment history. You're being penalized for filing BK, period. Paying your bills if you're filing BK won't help you at all. I found that out after the fact. Advice on this forum suggesting otherwise does not appear to be true.

My score dropped more than 100 points.

Re: bankruptcy & fico score

MarineVietVet — Tue, 30 Aug 2011 19:48:46 GMT

carolina98 wrote:
I advise stop paying your bills if you're going to file because there is no benefit to paying them. I paid mine up to the day I filed and have no late payments on my credit report. I found out that, at least with TransUnion and Equifax, only the BK is reported, not the payment history. You're being penalized for filing BK, period. Paying your bills if you're filing BK won't help you at all. I found that out after the fact. Advice on this forum suggesting otherwise does not appear to be true.

My score dropped more than 100 points.

As always any action taken or advice given when it comes to credit management is based on a YMMV outcome. What helps one person is never a guarantee that another person will get the same results.

It appears that paying all bills before filing does help some folks but unfortunately that wasn't your experience. You saying that "Paying your bills if you're filing BK won't help at all" doesn't mean it won't work for others.

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Re: bankruptcy & fico score

stanggt03 — Tue, 30 Aug 2011 22:55:38 GMT

I'd recommend that any credit lines that can be paid off and closed are done so before filing, otherwise you chance being blacklisted by that creditor, and also having more creditors on your report showing as included in bankruptcy.

THAT is something I personally didn't think about when I filed.

I was also led to believe by my lawyer that selling my car (I owed what it was worth) and letting them repo it with BK wouldn't be much different. But it is. Having an auto loan included makes my loan rate a lot higher than my wife, who reaffirmed hers (and it reports). Since I didn't realize the difference it would make, I let them take it, allowing me to keep the car a few months longer because I loved the car. Had I known, I would've sold it to the dealership that offered to buy it for what I owed. Heck, I probably could've bought it back after I was discharged!

Re: bankruptcy & fico score

beamMEup — Wed, 31 Aug 2011 01:07:58 GMT

Hi stanggt03,

That's a pretty dang frustrating turn of events - and one that's great to share on these forums.

We had an auto loan IIB.

It had a few 30 day lates on it from before the BK ( we had no clue how much FICO damage a late caused) - it was current at the time we filed. We paid off the auto loan through the CH 13 BK and received title to the car. We actually wound up paying off the car loan earlier through the BK than we would have on the original loan payment plan.

After the BK was discharged, we goodwilled the CU who carried the auto loan. It took us 3 tries, but they finally agreed. And we did it in person, which absolutely unnerved me - could've died. Unfortunately in our case, as often happens, the entire credit line disappeared from our CR's - not just the lates.

At any rate, we've gotten two auto loans since discharge and had very nice rates on both of them. So a GW may help when an auto loan is IIB. We lost the history, but we also have no lates or IIB's reporting on any auto loans and now get good rates (currently we're at 3.99% which isn't too bad) even with the BK itself still reporting.

I also have to note that our BK attorney was absolutely clueless on FICO scoring or rebuilding credit, or the long-term impact of BK. And he was pretty decent - this is just stuff these guys often are not aware of. We were lucky to find myfico and learn how to put the pieces back together.

Re: bankruptcy & fico score

stanggt03 — Wed, 31 Aug 2011 16:07:26 GMT

I tried a GW. It was through Ford. DW reaffirmed her car through Ford. They refused any adjustment though. I'm not worried. I'll get back to where I want before long. But this is definitely the type of things that should be in pamplets that are mandatorily given to people considering BK.

Re: bankruptcy & fico score

carolina98 — Thu, 01 Sep 2011 00:27:51 GMT

Well, why wouldn't it work for me? That doesn't seem to make sense. I paid all my bills on time and had only one account out of 11 that went 30 days late with the filing. I had an excellent payment history on all my accounts. I read here keep paying your bills helped your score. If it worked, FICO would not be telling me my Transunion FICO score is 599 (FICO only 628) because of a bad payment history and recent late payments. I didn't have late payments. FICO, in fact, shows no late payments on my credit report! Actually, I think FICO can't actually say that in its analysis of my report because it's not true. And I'm going to call them and address that with FICO. Its statement that I have a low score is due to bad payment history and recent late payments is simply inaccurate, and I have the records to show it. I printed out my credit reports 10 days after I filed, and all were showing no late payments.

BeamMEup, you're affliated with FICO, why not ask it about this issue. My report should state my score is low due to bankrutpcy, not late payments. It's misleading and inaccurate to say otherwise and hurts me with potential lenders.

Thank you.

Re: bankruptcy & fico score

carolina98 — Thu, 01 Sep 2011 00:33:47 GMT

TransUnion told me after I called to try understand why my accounts were showing as late payments that the more accounts you list for BK the more you're hurt with yoru credit. If I had known this, I would have paid off a $500 account (with a struggle) rather than let it go to BK. So number of accounts you list hurt you proportionately. I was told by Transunuon that FICO is saying in its analysis that there were late payments only because I filed BK, not because there are actually late payments. Not right.

Re: bankruptcy & fico score

orosie50 — Fri, 02 Sep 2011 18:47:03 GMT

Question: In 2002, I was going to file B/R, but before I went to hearing, had my attorney cancel hearing and I went into a debt program and paid my bills off. I have this record on my 3 reports showing B/R, dismissed.. I have repeatedly requested that this be removed because it has an impact on my credit even though I never did file B/Rm and no one will help me. Do I have any choice but to leave it on there?

Thank you,

Re: bankruptcy & fico score

orosie50 — Fri, 02 Sep 2011 18:32:27 GMT

What do you mean update to IIB? My current score is in upper 600's (687) I am working on a debt buydown program paying extra to get rid of a few debts and hoping that will also help.

Re: bankruptcy & fico score

orosie50 — Fri, 02 Sep 2011 18:36:56 GMT

I still don'f feel like I got a fair treatmen of this posting because I never actually filed. I dismissed it before it went to hearing. And it was in 2002. Over 9 yrs. ago.

If I could get a letter from the BK court stating this, and send to the 3 reporting agencies, do you think it would help?

Re: bankruptcy & fico score

hardlessons — Fri, 02 Sep 2011 19:16:41 GMT

I learned the hard way from Ch 7 and now I have not had a single credit card company, mortgage company want to touch me (not because of score), but because of the BK on the record. They are saying I need to wait the 7-10 years for it to come off the record before people are gonna deal with me again. Luckily, my wife had a good score and that allowed us our home and credit cards etc.

Re: bankruptcy & fico score

beamMEup — Sat, 03 Sep 2011 15:02:33 GMT

orosie50 wrote:
I still don'f feel like I got a fair treatmen of this posting because I never actually filed. I dismissed it before it went to hearing. And it was in 2002. Over 9 yrs. ago.
If I could get a letter from the BK court stating this, and send to the 3 reporting agencies, do you think it would help?

orosie50,

If your BK was dismissed over 9 years ago, it will age off your reports soon. It should report for 10 years. If, for example, you filed in June 2002, it will age off in June 2012.

Your CreditReports probably already have the information from the BK court showing that it was dismissed along with the date - and unfortunately, it will report - accurately - for ten years. You've already made it through 9+ years of reporting, with less than a year left to go. Hold on!

Re: bankruptcy & fico score

beamMEup — Sat, 03 Sep 2011 15:08:41 GMT

hardlessons wrote:
I learned the hard way from Ch 7 and now I have not had a single credit card company, mortgage company want to touch me (not because of score), but because of the BK on the record. They are saying I need to wait the 7-10 years for it to come off the record before people are gonna deal with me again. Luckily, my wife had a good score and that allowed us our home and credit cards etc.

Hi hardlessons,

Welcome - glad you're posting!

BK is tough, and I'm sorry for your experience. Although it does take some homework, folks with BK's can and do have good mortgages, and decent credit cards. Thankfully this forum is full of posts from folks like you and I who have been through a BK - and are kind enough to share their experiences. Although many credit cards will not consider folks with a BK, there are several that will. We've taken out two auto loans at very good rates, and have a mortgage with a great rate - all with BK still on the reports. Time is one of the issues - as your BK filing date ages, you'll find your options open up. And remember you can have a FICO up to 759 with a BK reporting. Life does go on after BK - and beautifully!

I'm glad your DW has a good score now - and yours will get there. Hope you stick around - there's some great info posted here on the boards.

Re: bankruptcy & fico score

shalane85 — Thu, 08 Sep 2011 23:56:06 GMT

Before I filed bankruptcy my score was a 408, but after I filed it went to a 563. The only new debt I have is a car loan I took right after I filed chapter 7.