The Federal Reserve Bank of Philadelphia published a study in 2014 where they analyzed 600,000 bankruptcy filers and examined their credit access after consumer bankruptcy between 2002 to 2013.
The Conclusion: The average credit score in 2010 went up more than 80 points — from 538 to 620.
Contrary to the bankruptcy myths out there, bankruptcy improves your credit score.
A credit score is composed of 35% payment history; 30% outstanding debt ; 15% length of credit history; 10% new credit; and 10% credit mix. Bankruptcy erases the 30% of outstanding debt and that is why your credit score increases – your income to debt ratio is much more favorable after bankruptcy because you have not debt.
Also, creditors; lenders; banks all know that you cannot file another bankruptcy for 8 years and so long as your gainfully employed they actually look at you as a good credit risk.
In every bankruptcy case, I download 3 credit reports along with a credit scoring system that allows me to tell my clients what their current credit score is today and what it will be in 12 months.
Last week, I had three clients that asked to know their credit scores today and what it would be after bankruptcy. Barbara’s credit score started at 463 on the day of her bankruptcy and it will increase by 163 points to 626 after bankruptcy is over in 90 days; Tom had a credit score of 556 on the day of his bankruptcy and his credit score will increase by 107 points to 663 after his bankruptcy is over; and lastly Malaika had a credit score of 575 on the day she filed bankruptcy and her credit score will increase by 86 points to 661 after her bankruptcy case is over in 90 days.
These three clients had a credit score increase of 163; 107; and 86 points.
The literature proves that credit scores increase after bankruptcy; and my own clients are the proof that credit score increase an average of 100 points after filing bankruptcy.
Call me for a free consultation at (215) 551-7109.