Bankruptcy Risk Score - The Hidden Credit Score
While most people are aware that their credit score can have a large impact on their financial lives, there is another score that the credit bureaus keep that most people are not aware of - your Bankruptcy Risk Score
Your credit score is made up mostly of your history of obtaining credit and paying off debt. This score helps determine what type of interest rate you receive on credit cards or loans that you apply for. Most people assume that it is this score alone is used by the financial institutions considering whether or not to give you a loan. The truth is that a bankruptcy risk score is now being used more and more when lending institutions are looking at a person's credit history.
The bankruptcy risk score has been around for about 20 years, but has been kept fairly hush - hush. It measures how likely a person is to file bankruptcy and uses information that makes it more specific than a credit risk score. The bankruptcy risk score is exclusively for lenders provided by the credit reporting agencies.
This bankruptcy score is supposedly a complex mix of your credit score plus your spending habits. The credit agencies and those that use this report (and have contributed to creating it) don't want to reveal the model because they spend a lot of time and money developing it and if they explain it, they are giving away part of it's value. Therefore little is said about this report (and why you have never likely heard of it before).
You may be able to learn a bit more about it in the near future. Experian is considering making its bankruptcy risk score available to consumers. This is after they revealed a study last July which ranked the states that had consumers who were most likely to file for bankruptcy within the next year.
Experts say that many of the same things which improve your credit score also improve your bankruptcy risk score. That includes paying your bills on time and not over applying for credit.
The bankruptcy risk report is usually used in conjunction with the credit score when a consumer gives their bank permission to pull their credit report for a new loan application, a bank card or a credit card. It is also used during account reviews to help determine whether to increase a consumer's credit limit.
Insiders say that the bankruptcy score is scored the opposite of your credit score. For your credit score, the higher the number, the better with 850 being the best. For the bankruptcy risk score, your want the lowest number possible. In fact, the score actually goes into negative numbers and can goes to approximately 2000.
News about this bankruptcy risk score is leaking out slowly so if you are one that keeps a close eye on your credit score, it would pay to keep close attention to the news for more information about this score emerging in the months ahead.
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