How much will a bankruptcy filing affect my FICO score?

How much does a bankruptcy filing affect your FICO score?  We now have a better sense of the answer, though in the big picture, it may not be the right question to ask.

FICO recently decided to make public some–not all, just some–of the information behind their mysterious, black-box credit scoring system.

The answer to the bankruptcy question is:  It depends on the individual.  But it appears to be somewhere in the neighborhood of a 130 to 240 points, according to the data released by FICO.  Though FYI, FICO stresses that the data is only a guide and the actual impact depends on the individual.

If you’re contemplating a bankruptcy filing in New York or anywhere else, however, how much it affects your credit score may not be the question on which to focus.  Why?  Because if you’re seriously considering bankruptcy as an option, then odds are you’re already in a difficult position and filing or not filing for bankruptcy won’t do much to hurt your score at that point anyway.  In fact, one of the interesting things revealed by FICO is that the lower your credit score is, the less it is impacted by a bankruptcy filing.

If you file for bankruptcy, your credit score will be affected.  But with your slate wiped clean, at least you have an opportunity to start rebuilding your credit.  And many of our clients actually rebuild their credit rather quickly.

If you try to tough it out, you may avoid whatever affect bankruptcy has on your score in the short run.  But if you’re laboring under significant debt and unable to make payments over time, then your credit score may be affected even more over time.  Plus, you won’t have that clean slate to give you breathing room to get things in order.

If you’re not sure what the right option is for you, the best thing you can do to address the situation is to talk to an experienced and trustworthy bankruptcy lawyer in New York.  A good bankruptcy lawyer with an established reputation is only going to recommend you file for bankruptcy if you really need to.  They’re going to ask you questions and make sure you understand the ins and outs of all of your options.

Please feel free to contact me if you’d like a free initial bankruptcy consultation so you can start addressing your financial issues, getting your questions answered and getting your financial life back under control.

Contact

EMAIL Bruce Weiner
Phone
(718) 855-6840 (Local)
(866) 402-8476 (Toll Free)
Fax (718) 625-1966

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Can I rebuild my credit after bankruptcy in New York?

Yes, you can rebuild your credit within a few years if you’re careful about your finances and pay your bills on time after you’re done with your bankruptcy case.

A lot of people worry about their credit history when they consider filing for bankruptcy in New York.  It’s a legitimate concern and a healthy impulse to raise the question.

However, in the grand scheme, if you’re behind on a lot of bills and unlikely to be able to pay them off over time, then your credit history is likely to suffer regardless of which path you take.  Sure, bankruptcy affects your credit score.  But bear in mind repossessions, foreclosures and collection lawsuits become part of your credit history and remain there for as long as a bankruptcy does (i.e., 10 years).

If you’re drowning under a mountain of debt, then a more logical way to think about it is that filing for bankruptcy is the first step you take towards rebuilding your credit history.  When you file for bankruptcy, the case ends with a discharge.  The discharge gives you a clean slate and the breathing space to get your finances in order.  And regaining control of your finances is the path towards rebuilding your credit score.

Additionally, after your discharge you are suddenly very attractive to certain lenders.  Why?  Because you suddenly have little or no debt.  As a result, most debtors receive new credit card offers after coming out of bankruptcy.  Though it’s important to note that the credit cards generally have stricter standards and more limits than the types of credit cards you might have had previously.  Still, if you need a credit card, and you use it responsibly, then you’ll build up your credit score gradually over time.  In fact, using a credit card and making payments on time over a period of time actually improves your credit score.

If you have more questions about credit cards and credit card debt, or if you’re considering filing for bankruptcy in New York to deal with credit card debt or any other debt, please feel free to contact me for a free initial consultation.  I’ll be happy to answer all of your questions and figure out the best strategy for you to move forward with your financial life.

Understanding your credit score in the new economy

A recent Washington Post article on credit scores (“Credit Score Shell Game“) is very illuminating.  It’s one more example of how the world of credit cards is getting less warm and fuzzy and how struggling Americans can get scammed in the process.

The gist of it is that:

• Credit scores are becoming more important as credit tightens and banks are less willing to lend.
• Many Americans’ credit scores have been decreasing as people face more financial challenges.
• As a result, people are more interested in checking their credit scores on a regular basis.
• However, it’s not so easy to figure out what your credit score is because there are a few different systems in use.  (“FICO score” is the one most people are familiar with.)
• Many people are paying $14.95/month for credit-monitoring services (e.g., FreeCreditReport.com and TrueCredit.com) only to find out that the score they’re given is inflated and not the same as the score that lenders are using.  (That is, they get a “fake-o score” instead of a FICO score, according to Even Hendricks, author of Credit Scores and Credit Reports and editor of The Privacy Times.)

The bigger picture is that times are tough.  Even if you’re doing everything you’re supposed to be doing, the playing field may still feel like it’s tilting against you.  And while our government