Before I start my rant, be advised that this is not directed at anyone, this is just my observation and personal experience. I'm saying it to invoke dialogue -- not a flame war. Start Rant-- Why does it seem that people who file BK have higher credit scores than people who have "regular credit issues"? I fall into the second category. From a personal standpoint, my credit score has been hovering between 600 and 615 for a while now (which is much better then the 550 it was about 2 1/2 years ago). I have 4 paid judgements from 1/96(3 from the same apartment complex -- roommate didn't pay rent after I moved out and didn't take my name off lease so that he could stay there). I have one paid collection from CMI that I am trying to fight. I haven't been late on a payment since 1998. In the interim, I've paid off 2 cars, bought a house, etc. I have 3 CCs with small limits and zero balances. My judgements are scheduled to fall off January of next year, but I'm not even excited about that anymore. From what I've read, I can't expect any significant score increase from those. So with all of this "living right" that I have been doing, my scores still show me to be "moderate/high risk". I'm still afraid to go into Home Depot and apply for a card. At the same time, I hear about folks just out of BK with 650+ scores and have bought new cars, gotten prime CCs with great rates. How/Why is that possible? I thought BK was the ultimate no-no and would screw you up for 10 years -- seems like it screws people up for 10 months to me. If you've had to file BK for legitimate reasons, please do not take offense at my comparison. Whatever you did, you did because of your reasons, and I will not even attempt to comment on that. My statements are more about the "system" that we are living in. Then I look at people who file BK "for the fun of it" and it leave me feeling both upset and a little envious. It's like these folks know that they will back on track shortly, so they don't worry about it. I have a "friend" who was in worse financial shape than me, filed BK (becaue his lawyer told him to) and was driving a brand new Lexus the following year with a wallet full of new Citibank, Chase and other prime cards. I was paying double digit interest on a Honda and he was paying 7% on a Lexus. I saw him a couple of months ago and he told me he had filed BK AGAIN!!! This time, he was driving a Mercedes... It just doesn't seem fair... End of rant, but still ticked off... ----------- Comments are welcomed and expected... And as always, this is..
Hurricane, I have been reading this board for about a month and to be honest. I was wondering the same thing so here is a courtesy bump for you
Same thoughts, had I of known 5 1/2 years ago what I know now, I probably would of taken the alternate route.
I am going to try to comment even though my name is not LisaMc Fico. I don't think anyone on this board has the answers to why a person's score is what it is. The longer I work on my credit file, the more that I am CONVINCED that credit scores are truly derived by a Random Number Generator (ala George!) I do know this much.....credit scores are highly complex mathematical and statistical models. They do not favor one individual over another. They take volumes of information and attempt to summarize it into one meaningul number, the credit score. Many will debate this number is meaningful at all. Your example of your friend driving a Mercedes after a recent bk is probably cause to believe that the score doesn't mean much. In this model, the program takes many elements into consideration. Don't take this the wrong way, please. It is not meant to be derogatory in any way shape or form. It doesn't really surprise me that a person "living right" could have a score in the low 600's. You have several good cc's, 4 judgements, etc. From what I understand those judgements probably, due to their age, aren't playing as big a part in your score as they once were. Older items carry less weight than new negative items would. The scoring model seems to favor: 1. Big limits - you said your limits were small 2. Carrying some balance - you said you carried no balance 3. A pre-determined number & type of card - Do a search on this. I know I have read exactly what the mix is, but I don't recall. It is something like 3 bank cards, and 3 retail cards were optimum 4. At least 1 inquiry - as bizarre as that might sound 5. Presence of a mortgage - from my own experience, I don't see much of a boost for a mortgage even though it was perceived to be a plus. 6. The model favors long credit histories - you didn't say anything about this in your post. Were the judgements your first credit experiences? That would mean your file is about 7 years old? Maybe that is not considered to be a "mature" file. Even though a person filed for BK, for whatever reason that might be, they may still score better because of the items I listed above. As far as approval goes after a bk, I can promise you that your friend didn't get prime rates with a bk on his record. Maybe he had a friend or a relative that was a loan officer. Maybe the rules were bent for him because of his ties. Who knows? Maybe he had a ton of money to put down on the car and financed some small part of it at 15-20% interest. Without knowing more about the subject, there is no telling how he got what he got. Before I say this, know that I think it is crazy too! It does seem like lenders (credit cards) like to be in good company. I started 20 years ago with a small local department store card. Then I got a gas card. Then I got another store card. THen I got my first Visa. After that, I got an AMEX. From that point on the world beat down my door to give me more credit. I have no idea what my score was. I had never seen a copy of my credit report at that time. You have to have credit to get credit. By the time I had enough credit that banks considered me a great customer, I had too much credit for me!!! I was in over my head! This happens to people every day! Bottom line is the model tries to create a method by which lenders can quantify their risk. As flawed as the system may be, it is the industry standard. I completely understand your frustration. IT DOESN"T SEEM FAIR AT ALL BECAUSE IT ISN"T!!!!
I agree Hurricane, it does not seem fair. I was once about $25,000 in debt with an income of about $28,000 a year, on top of that an apartment rent of $620 a month. But I was under the impression (evidently, a naive impression) that bankruptcy was the worst thing you could do to your financial history, so I stuck it out. At one point, to pay off this nightmare debt I found myself in, I had to work 2 fulltime jobs. That was horrible. And finally, finally when I got out of this mess, I found my credit scores almost completely in the high risk range. Even after initial credit repair operations, my scores remain mediocre (CE 637, TU 646, EX 685).
Hi Just as a side note... We have lowish scores mine hang out around 585 with a charge off and a coulple collections I working on but we filed bk in 10/93 and even though it is 9yo that bk is still a reason for us not getting a damn gas card....granted not the only reason but still we were young and so stupid 9ys ago..I guess the point is even though some might have higher scores with a bk..it still will follow them for the whole 10yrs as a negative ... Jamie
Oh yea! I almost forgot one really important point in all of this. Let's say a person filed a bk 7 years ago. He now has scores in the upper 600 to low 700's. Seems like pretty good scores to me, right? Well, that person has an excellent chance of being denied credit because of the bk. Period. Doesn't matter that he is a responsible person. Most lenders have a bankruptcy screen on their applications. If a person applied, like I described above, they would be denied when the application was reviewed. That is the negative about bk. It stays with you for a long long long time. You can have a good score, but the presence of that bk will haunt you long after your score improves.
I appreciate the feedback on this thread! Like I said in my initial message, everyone has their own reasons/rationale for their current situation. If I had known then what I know now, I would have done a lot of things differently (as most of us would attest). I am glad that I didn't file BK, I didn't feel that I had enough debt to justify it. Next year will be a big milestone for me, as all of these things will go bye-bye..so I'll see how my scores react. I am on a mission to get to 680 though...since that seems to be the level where you can go out in public again As always..
I think you'll find once the remaining derogs go bye bye, that your score will take a big jump. When the derogs get to be about 6 months from deletion, dispute them as oblsolete. The cra's usually will delete derogs about 3 months prior to the actual purge date, but if you dispute a few months before that, I have found they won't even mess with it, they will just delete them. Good Luck.
i know how you feel... i too have tried to pay my bills and have avoided bk. even when advised to file by friends and family. I have been bearing financial responsibilty and have learned from my respects. my best friend filed bk and two weeks later was driving a lexus.... talk about po'd.
Yep the whole scoring is messed up. I just got turned down because I took out a finance loan. When it hit I lost 16 points. I paid it off 2 months later and I did not get a single point back from it. Now I apply for a cc and they turned me down because I took that stupid loan out- they could care less if it is paid. The worst part is since it is a 'positive account' it will be there until 2012. I guess there goes ever getting any credit for 10 years. I shoulda just ran up debt and bked.
It isn't fair. Thanks for bringing up this thread. I knew a couple who had declared in 1997. In 1999 they had a brand new infiniti, Grand Jeep cherokee, a 4 bedroom house in Scottsdale, AZ. The husband had just gotten a new job and was making more money and people just overlooked the BK because of the income. But it's not fair. Your score should be your score and income shouldn't even come into the picture. Scoring model are a predictor of past behavior with money and finances. It doesn' t matter how much money you are bringing to the table, because according to FICO, you will have bad money management no matter if you have 2 cents or $200,000. But, what didn't seem fair, is getting fairer. I've been following the threads on here about the evil bankruptcy law that's about to pass. I've always thought that it should be harder to get a BK. Now it will be. And that's fair to the rest of us who were under the impression that BKs were bad and tried to avoid it at all costs and got stuck with years and years of debt on our reports. I'm not flaming...just trying to add to the dialogue. I also don't meam to disparage anyone with a BK. I don't know the reasons and only you know your own life.
I think sometimes bk is a very legit financial alternative, of course, such things are always open to abuse.
Let's see if I've got this straight. BK then Lexus, another BK then Mercedes.... Hmmmmmmm Maybe it's just me, but I thought this was all about credit repair and not making the same mistakes that landed us here in the first place. Personally, I LOVE new stuff, especially cars, but given the depreciation the moment you drive off the lot, is it REALLY worth it? My wife would LOVE a brand new Suburban and I'd love a new Volvo S70, but I just can't justify it. Once we get the house, I'll probably get one newer car such as a one-year old Mazda 626 for about 11K at the local Hertz Car Sales lot, but that's about it. I personally think there's a lot of bad karma attached to having too much money or living large. Maybe it's because I've had it and lost it or maybe it's because I'm older and priorties have changed. At any rate, let them BK and new car themselves into oblivion. If they really need all that to feel good about themselves, well................... Just my 2 cents.
I hate to see the abuse of the current BK system, but you know what's funny? I'm actually against the BK reform that they are trying to pass. Simple reason is that it will affect the middle class much more than the upper class. The reasoning is simple, rich folks have more money to hire better lawyers who can find better loopholes to save more money for their clients. Middle class folks are at the mercy of whatever lawyer they can afford. Does anyone here actually this the current duo in the White House and the folks in the Senate are going to pi$$ off their rich friends? They're having a hard enough time trying to deal with this fiscal reporting mess that a lot of these companies have gotten caught doing. How can the VP do anything when he is being investigated himself? How can Bush do anything to Enron when he practically lives next door to Ken Lay. How can Congress do anything, when a lot of them have abused the current BK system themselves? I wish Clinton were back in office. At least he was semi-broke like most of us! He didn't have to suck up to anyone. There used to be a stigma attached to filing BK, but that seems to have gone away -- hence the abuse of the system. Again, this is definetly...
I would have to agree with you. My mother has 45 yrs of perfect credit, gazillion good tradelines and cc limits over $25K. ONE "sale before foreclosure" is on her bureau... not hers, so she is disputing, BUT her equifax score is lower than MINE?!?!?!?!?! I have 9 yr old BK7, 5 yr old BK13 (divorce of previous hubby then drunk new hubby - soon to be ex), a judgment (which I has set aside 7/9/02 and EQ hasn't removed yet!) 5 collections and 7 good tradelines! However, her EX is 795 and her TU from worthknowing was 85. My EX is 593 and TU on worthknowing is 5. That combo seems more realistic!
My personal opinion, worth a full two shiny copper coins, is that the scores are more accurate on reports containing (accurate) negative information, because lenders have decades of experience in judging risk on these types of reports. So, excepting those lenders who screen out BK's entirely, many lenders will lend to people with BK's, becuase they have a pretty good handle on the associated risk. Credit scores become much less meaningful on reports with no derogs; it becomes silly time as they try to prove risk using positive info. Non BK reports with derogs probably fall somewhere in the middle, and in your case, hurricane, I concur with Lisa and her reasons that I snipped out of her quote above.
I agree Racer! I think that reports with negative items are probably scored in a more meaningful way than positive ones are. Another aside.... I have heard this logic before, and it makes a certain degree of sense to my logical side. There are instances where an individual with a bk is considered a good risk. This would usually apply to secured debt i.e. car, house, boat, etc. If you filed for a bk in 2000 for example, you do not have the option to re-file again for a specified number of years (7 I think). If you don't/can't pay for the asset, there is zero chance of you filing a bk. Anyone else who has never filed a bk does always have that option available to them. The bank would keep whatever money you put down on the car/house and repo the asset. This is not a loan they would actively recruit to get, but if everything else in the person's loan package lines up, this is a way to bring some comfort to the lender. They are also going to charge a premium on the rate because of the bk. All of the sudden the loan doesn't look so bad to the underwriter. Makes sense in a twisted sort of way!
Hurricane, I have to take your side on this one - I have been scratching my head bigtime on this. From what I hear, people that file BK ALWAYS have a fairly high credit score within a year of discharge (650) HOW can this be - everything I was taught was that BK was the equivalent of a nuclear bomb on your credit (Bull !!!) I have never filed BK, but because of school loans (10 derrogs) I cannot come close to a 600 score on any of my reports. All my derrogs are atleast 1 1/2 to 5 years old. Additionally I have Amex Gold, Amex Optima Platinum, and Sign/Travel (all of which have been open for over 10 years and never once late) allot of good that was!!!! -Sal
