Bankruptcy risk score can affect ability to get a loan

Many consumers may be familiar with the fact that their credit score plays an important role in being able to get a loan.

However, what they may not know is that they also have a bankruptcy risk score, which is used in a similar way by lenders. According to a recent blog post from the Boston Globe, bankruptcy scores can range from a negative figure to up to 2,000. A lower score is actually better for a consumer trying to get a loan.

"It helps the bank better assess their risk of lending, and hopefully reduce the amount of their bad debt reserves," the blog said.

Unlike a credit score, which consumers can purchase, the blog noted that a person’s bankruptcy score has not been available in the past. However, the blog relayed the story of one investor who did get a copy of his bankruptcy risk score. Getting this score in the future could help consumers assess their ability to get a loan or credit card.

Given the fact that lenders have tightened credit requirements for their products, having a high credit score has become more important. Having to declare bankruptcy is the most detrimental thing a person can do to their credit report, as it can follow a consumer for a number of years.

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