One of the primary reasons people choose to file for bankruptcy is because it can help improve their credit. It takes time, but resolving your financial issues through bankruptcy and keeping on track after your bankruptcy is complete can have a major impact on your credit score. For some, bankruptcy is the only hope for rebuilding credit and ever being considered a worthy credit risk in the future.
What Are a Few of the Things You Should Know About Bankruptcy and Your Credit Score?
First, it’s important to understand your credit score. Credit score is an umbrella term used to describe the scores compiled for you by various entities. For instance, the FICO score was developed by a company that licensed the use of its scoring system to the three main credit bureaus. The bureaus eventually created their own scoring system, which is called the VantageScore. Both VantageScore and FICO scores are used in the lending industry today.
VantageScores are used by lenders to help them determine the credit worthiness of a loan candidate. VantageScores range from 300 to 850. Your VantageScore takes into account your credit history from the three major credit bureaus and compiles that information into a single score. It evaluates one month of history, which is advantageous to those who are new to using credit.
Consumer Friendly Credit Scoring
Many consider the VantageScore scoring system far more consumer friendly than FICO. For instance, when calculating your score, the system takes into account the frequency and severity of late payments, as well as how recent those late payment occurred. This means a late payment three months ago is less damaging than a late payment within the last month. VantageScores essentially weight late payments, whereas FICO treats all of them the same.
VantageScores also do not include collection accounts paid in full, which means your score improves a great deal when you pay off outstanding collection accounts. FICO calculates into your score accounts higher than $100, even if they have been paid in full.
Monitoring Your Credit Score
Understanding how credit scores are calculated is an important part of restoring your credit and getting your financial situation back on track. Tracking your VantageScore is a great way to monitory your credit as you move through and out of bankruptcy. It can be empowering to see your score improve on a monthly basis, even if you struggled with finances in the recent past.
To get information about viewing your VantageScore, click here.
For more information about improving your financial situation or to speak to someone about how bankruptcy can help you improve your VantageScore, contact the Law Offices of Robert M. Geller at 813.254.5696.