Bankruptcy Risk Score
Bankruptcy risk score is a term that consumers do not hear as often as credit score. However, lenders use the bankruptcy risk score, as well as credit score, to determine whether they should offer you the loans or not. Simply put, the score determines the likelihood of a person filing bankruptcy, and the lower the scores the better. The scores may start in the negative all the way to 2000. The way bankruptcy risk scores work is opposite to credit score. In credit score, the number goes from about 300 to a high 850, and 720 is considered good credit. Anything below 600 is considered high risk. However, in bankruptcy risk scores, the lower scores the better. High risks customers will have higher scores while good customers have lower scores. Many people are aware of their credit report but not their bankruptcy risk scores. Studies have shown that out of ten people, only one person has ever heard of the term.
Financial experts also refer to bankruptcy risk score as debt analysis, which is more specific and is determined based on your income, credit use, and credit limits. Commercial lenders have to find a way to asset customers’ risk in taking out the loan. The risk scores are most used by lending institutions to help reduce losses on their part against individuals who are predicted to go bankrupt in the future. Ways to improve your bankruptcy risk score is similar to how you would improve your credit score: pay your bills on time, keep your balances low, do not open too many accounts, doing so will increase your chances of not being able to keep up with it, and only have more than a few accounts only when necessary.
If you want to know your bankruptcy risk score, contact the three main credit bureaus. There is usually a separate fee for the scores.
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