How Bankruptcy Affects Credit Scores
Bankruptcy can have a significant impact on credit scores, making it harder for people to access credit in the future. This blog aims to explore how bankruptcy affects credit scores.
How does bankruptcy affect credit score?
Bankruptcy has a significant impact on credit scores because it is a serious negative event that stays on a person’s credit report for up to ten years. The impact of bankruptcy on credit scores varies depending on a person’s starting score, but in general, it can reduce a person’s credit score by up to 200 points.
According to FICO, a credit score provider, the exact impact of bankruptcy on credit scores depends on several factors, including the starting score, the length of credit history, and the number of accounts included in the bankruptcy. FICO provides a helpful chart that shows how bankruptcy affects credit scores based on starting scores. The chart shows that a person with a starting score of 680 could see their score drop by 130 to 150 points, while a person with a starting score of 780 could see their score drop by 220 to 240 points.
In addition to the immediate impact on credit scores, bankruptcy can also make it more difficult for people to access credit in the future. Most lenders view bankruptcy as a serious negative event that indicates a person’s inability to manage debt responsibly. As a result, people who have filed for bankruptcy may have a harder time getting approved for credit cards, loans, and other types of credit.
Web links to websites as proof:
Here are some web links to websites that provide additional information about how bankruptcy affects credit scores:
- myFICO: How Bankruptcy Affects Your Credit Score
This web page from myFICO provides detailed information about how bankruptcy affects credit scores. It includes a chart that shows how much a person’s credit score could drop based on their starting score.
- Experian: How Long Does Bankruptcy Stay on Your Credit Report?
This web page from Experian explains how long bankruptcy stays on a person’s credit report. It also provides information about how bankruptcy affects credit scores and what people can do to start rebuilding their credit after bankruptcy.
- Equifax: How Does Bankruptcy Affect Your Credit Score?
This web page from Equifax explains how bankruptcy affects credit scores and what people can do to start rebuilding their credit after bankruptcy. It also provides some tips for managing credit responsibly after bankruptcy.
Conclusion:
Bankruptcy can have a significant impact on credit scores, making it harder for people to access credit in the future. The exact impact of bankruptcy on credit scores depends on several factors, including the starting score, the length of credit history, and the number of accounts included in the bankruptcy. However, in general, bankruptcy can reduce a person’s credit score by up to 200 points. It is important for people who have filed for bankruptcy to understand how it affects their credit score and what they can do to start rebuilding their credit.