Does bankruptcy really weigh less over time?

Anonymous · ‎01-08-2019

It’s a kind of famous line from credit experts that bankruptcy weighs less over time. I disagree. Ones credit score may increase over time, but it’s rare that credit scores are considered in isolation. It’s your report and what’s on it that really matters. If person A has a 720 with no public judgments such and bankruptcy and person B has a 720 with a bankruptcy, person A is much more preferred for credit products and services. A landlord may not rent to person B, even if the bankruptcy was 9 years ago. Person B has to always explain him or herself to a landlord or a potential employer. It may be argued that some companies will give a loan or a credit card to such an individual, but all in all, until it completely drops off, this person must wait to exhale.

Revelate · ‎01-09-2019

The simple answer is it does indeed count less.

It doesn't count zero. Nor does a 30D late even when we're talking FICO scoring.

Two files:

1) 720 FICO 8 with 6 months history

2) 720 FICO 8 call it 8 years of perfect payment history post BK

Which one would say Chase rather UW? They generally won't even touch the first one cold in off the street, not sure where their UW line for BK's is now but I think it's still 8 years? Pick some other lender, there will be one that does similarly to this who wouldn't extend credit to a BK file right after said BK, but will after some period of time.

But I'd suggest that both FICO scores increase (there's some age breakpoint on derogatory scorecards) as a BK ages, and you get more access to more credit products too similarly. So it does count less, but it still counts.

Anonymous · ‎01-09-2019

@Anonymous wrote:
It’s a kind of famous line from credit experts that bankruptcy weighs less over time. I disagree. Ones credit score may increase over time, but it’s rare that credit scores are considered in isolation. It’s your report and what’s on it that really matters. If person A has a 720 with no public judgments such and bankruptcy and person B has a 720 with a bankruptcy, person A is much more preferred for credit products and services. A landlord may not rent to person B, even if the bankruptcy was 9 years ago. Person B has to always explain him or herself to a landlord or a potential employer. It may be argued that some companies will give a loan or a credit card to such an individual, but all in all, until it completely drops off, this person must wait to exhale.

While I get your point there is a lot more too it. They take your FICO score and then go from there. I believe most places have internal "rules" as well. Some will say sure you have a BK but it's been 7 years and you have shown you can handle credit with no lates so we will take a risk on you, however, your interest is going to be a little higher due to the BK or not it all depends on the underwriters. Others won't even look at you. I believe places like Chase won't even give you a card until they see no BK on your report.

I guess what I am saying is they look at you as a whole and not just a part of your report (though some do look at just parts of the report). It all depends on the company.