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Q: How does declaring bankruptcy affect one’s credit score? Is it calculated differently than before?
A: Surprisingly, it may actually be slightly higher than it was before you declared bankruptcy. That’s because all the outstanding high balances, late payment records, and any unpaid debts that you included in the bankruptcy filing are now showing that they were included in whatever bankruptcy chapter you filed.
You’re not going to see a huge increase, however, so you should not consider filing for bankruptcy just to improve your credit score. The decision to file bankruptcy should be one that is considered only after other options and alternatives to pay down your debts and catch up on late payments have been exhausted.
However, in calculating your new score, the Fair Isaac Company, otherwise known as FICO is going to compare your credit standing with others who have declared bankruptcy. Your score is not being measured against one belonging to someone with perfect credit, so that can be an advantage there. The old adage of there is always someone that is worse off than you are may definitely apply here.
Declaring bankruptcy basically lets you start back over with a clean slate. So, instead of considering how you might be able to raise your credit score, you need to concentrate on maintaining a good credit history from here on out. This is more important than any score.