What Will Your FICO Score Be After Filing Bankruptcy?

Bankruptcy filings hit an all-time high -- nearly 1.6 million -- for the 12-month period ending September 2010, according to BankruptcyAction.com. Bankruptcy harms FICO scores more than anything else, because filing bankruptcy is the last resort when you cannot handle your debt. Nobody can say what your credit score will be after filing bankruptcy, but with work you can improve your score after bankruptcy.

Effects

The rest of your credit history will soften the harmful effects of a bankruptcy, but expect your FICO score to drop 100 points and possibly more if you had good credit, according to Consumer Credit Counseling Services. Bankruptcies also stay on your credit history longer than any other negative item -- 10 years.

Misconception

In some instances, mostly for people who already have a severely damaged credit report, your score can be so low that bankruptcy can actually improve it, according to Smart Money. Bankruptcies replace your debt reporting and late payment history with "Included in Chapter 7 Bankruptcy" or "Included in Chapter 13 Wage Earner Plan." If you have a lot of accounts, a single bankruptcy will probably be better for your credit rating.

Even if you have a very poor score, you probably won't see much of an increase in your score, however. The benefits come in the long term because the FICO score compares you to other people with a bankruptcy, rather than to good borrowers.

Considerations

Your credit score should be of secondary importance when deciding whether to file bankruptcy, suggests Smart Money. If you cannot meet your debt obligations, bankruptcy can give you a reset instead of constant payment issues. In some states you may have to sell off your assets before meeting bankruptcy filing requirements. Ideally, however, avoid bankruptcy at all costs.

Tip

You can bring your FICO score back into the excellent range within two years of filing bankruptcy. Start by making sure the credit report declares all accounts in the bankruptcy as included in your filing. You will likely have to rebuild your credit through a secured credit card -- a card that requires backing by an asset.