Clarify credit score and bankruptcy relationship

[carolina98]

Could you please clarify.

What's the difference in terms of getting credti of having a bankruptcy  and a credit score of 500 versus having bankruptcy  and a credit score of  more than 700?

Is bankruptcy the determining issue? How much does a good credit score offset the bankruptcy, or does it?

[Anonymous]

Hi carolina98,

Yes - it's much easier to get credit with a BK and a 700 FICO vs. a BK and a 500 FICO.

I'll use the generic terms "you" and "your" in my post, even though I'm not sure if you have a BK, or if you're asking for someone else.

Some creditors will not work with BK's regardless of FICO scores, so focus your efforts on working with creditors who will work with BK's still showing on your credit report.

And then give them your very best FICO.

Remember, FICO scores are based on behaviors, so a 500 score (or even a 600 score) exist because of derogatory items on the credit report.

A BK, in and of itself, will limit your score somewhat, but it's possible to have a score in the 700's with a BK reporting.

There's a lot of helpful information in the Rebuilding Your Credit forums, that will help you know what to do to increase your FICO score as you move forward from a BK. 

Also, there's a very helpful BK Friendly CC's Listed thread that's worth checking into.

I hope that's somewhat helpful.

[RobertEG]

FICO does not score debt.  Paid, unpaid, or discharged thru bankruptcy.  It scores the derogs that were reportable while the debt was previously due.

Until the old derogs reported by either the OC or CA drop, due to their old age, at 7 or 7 1/2 years, FICO impact is the same.  The BK is a separate derog, that has own drop date. 

If a future credit approval is based only upon peek at your FICO score, why it is high or low wont be a consideration.

When you move up the ladder of credit asked for, the creditors will probably do a manual review of your credit report.  Manual CR review that shows a BK raises some questions.  It depends on the level of manual review done by the prospective creditor.

[MarineVietVet]

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@RobertEG wrote:

FICO does not score debt.  Paid, unpaid, or discharged thru bankruptcy.  It scores the derogs that were reportable while the debt was previously due.

Until the old derogs reported by either the OC or CA drop, due to their old age, at 7 or 7 1/2 years, FICO impact is the same.  The BK is a separate derog, that has own drop date. 

If a future credit approval is based only upon peek at your FICO score, why it is high or low wont be a consideration.

When you move up the ladder of credit asked for, the creditors will probably do a manual review of your credit report.  Manual CR review that shows a BK raises some questions.  It depends on the level of manual review done by the prospective creditor.

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I beg to differ with you Robert. According to What's In Your Score 30% of your total score is Amounts Owed which is debt. These amounts include:

• Amount owing on accounts
• Amount owing on specific types of accounts
• Lack of a specific type of balance, in some cases
• Number of accounts with balances
• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

So yes FICO does score debt.

Scoring of any derogatories is under Payment History.  A completely separate category of the scoring formula.

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

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