Were you aware that you have a score for bankruptcy? Read on for details.
You probably already know about your credit score. That’s the number that creditors use to say yeah or nay on loans, increase your your credit card limit or perhaps prevented you from the lowest interest rate on your dream car. Well there’s another scoring tool you should know about. This one is called the bankruptcy risk score.
This little secret has been kept hidden from consumers for nearly 20 years.
So if you have a score what were you graded on? Your ability or likeliness to file for bankruptcy.
It is used by credit reporting agencies and geared specifically to lenders. When a consumer gives the bank permission to pull his credit report during the application process for a new loan, bank card or credit card, and during the periodic review of clients’ accounts to determine whether to increase a consumer’s credit limit, this score can be viewed.
To ensure that lending institutions maintain solvency it is required there be a capital-to-risk ration. Bankruptcy scores gives banks a more finely tuned instrument to assess true risk within their portfolio. As such, the bankruptcy scores could enable lenders to potentially lower their bad debt reserves because they can more accurately assess a potential risk.
Credit reporting agencies weren’t the only ones looking into this innovative approach. Researchers say a few credit card companies in the late ‘90s developed a means to make the score a more powerful tool, based on a consumers’ spending habits and types of charges.
What they tried to do is combine credit bureau information and transactions to get a better idea of risk. They would use that and make the score available and even go as far as sending to issuers, that subscribe to their service, specific alerts when a person exhibits warning signs of higher bankruptcy risk.
Analysts at credit reporting agencies say advanced mathematics and data analytics are used to determine the complex score. However, per the analysts, some variables come directly from your credit report, such as how the credit is used, how often a bill payment is late and the number of inquiries made.
As most know when it comes to a credit scores higher is better. With the Bankruptcy score lower is better. The bankruptcy score range starts in the negative numbers and can increase to possibly 2,000.
Are you are wondering why is was kept from the public? The idea was that people spent time and money researching the scoring model, and no one wants to disclose the model because they would be giving away the value of the research that they’ve conducted.
Before you have to file for bankruptcy do a free search for unclaimed money. It is known that there is over $25 Billion being held by the government. This unclaimed money can be yours. Search, find and claim this lost money today. It is reported that 9 out of 10 Americans have unclaimed property.