Filing for bankruptcy and the bankruptcy process can affect your FICO score. FICO is your main credit score and most lenders look at it when they are deciding whether to let you borrow money.
Why FICO Matters
Your credit score can determine your eligibility for many things-credit cards, auto loans, home loans, mortgages, rent, utility deposits, rates on insurance-as well as the interest rate you receive on all money borrowed. Some lenders have set rules about FICO scores-they are not allowed to approve anything below a certain amount. Sometimes potential employers can even check your FICO rating.
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Experian, TransUnion, and Equifax all report these scores (FICO was created by the Fair Isaac Coorporation). Your credit score is set by different elements: outstanding debt, length of your past credit, credit acquisition attempts, payment history, and unpaid debt.
Bankruptcy Negatively Affects FICO Score
There is no way to get around the negative effect that bankruptcy will have on your FICO rating. If you go through the bankruptcy process with a high score, you will notice a significant drop in your score. If your credit has already been severely damaged by debt, your score may not experience a significant impact. Your Minnesota bankruptcy lawyer can provide further information about bankruptcy's effect on your specific FICO rating as each situation is different. If you include all accounts when you file for bankruptcy, your rating will also be lowered more than it would be had you only included your main accounts.
Fix the FICO Score
Just as your FICO score can fall, it can also rise. When you file bankruptcy, your score is compared only to the score of others who have filed bankruptcy. In a pre-bankruptcy situation, your score is in comparison to all others who have not filed bankruptcy. If you limit the amount of debt you incur after filing for bankruptcy, it is possible to improve your FICO rating.
Your FICO rating will be affected in the long-term if you choose to file for bankruptcy. This is important to consider if you will need available credit in the next several years and is something you should consider discussing with your Minneapolis bankruptcy attorney. The bankruptcy can remain on your credit report for ten years and can affect your FICO score for that long.
Before filing for bankruptcy, it is best to speak with a Minnesota bankruptcy lawyer-especially if you are concerned about the impact bankruptcy will have on your FICO score.
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Rating of Credit After Bankruptcy
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