Deciding whether or not to file bankruptcy is a big decision, and one of the biggest factors is the impact that bankruptcy will have on your credit score. As you probably know, a credit score ranges from 350 to 850. Below 600 is generally considered “poor”, around 650 is considered “good” but not “excellent”, and 720 and above is considered “excellent.”
For each and every one of our clients, we run a credit score simulation showing your current score, and what your credit score will be 12 months after bankruptcy based on credit scoring models and statistics provided by Equifax, Transunion, Experian, and LexisNexis. Here is an example of one of our actual clients, who had a somewhat typical credit score recovery projection.
In this example, this person’s score was 525 at the time of the bankruptcy, and projected to be 627 12 months after the bankruptcy which is a 112 point improvement.
Out of our last 1,000 client for whom we have run this analysis, here are the average credit score recovery numbers:
Average Credit Score before bankruptcy: 561
Average Credit Score 12 months after bankruptcy: 640
Average Credit Score Effect: +79
Note that this credit score projection does make some assumptions. It assumes that you will take certain specific actions in order to rebuild your credit-worthiness; that you will get a new credit card after bankruptcy with a $500 limit and maintain a $300 balance on that card, with all payments made on time.
Looking further into your post-bankruptcy credit expectations, Fair Isaac (who provides the FICO scoring model) provides a a score simulator on their website Myfico.com. Their simulator shows that a person can obtain an “excellent” or 720 FICO score 3 years after bankruptcy.
For more specific information about credit after bankruptcy, looks for my other articles relating to getting a mortgage loan after bankruptcy, and how long to obtain an “excellent” credit score after bankruptcy.