The importance of credit score and adverse affect of bankruptcy on credit score.

While filing for bankruptcy is becoming a common practice worldwide and millions are swimming in debt ; avoiding bankruptcy and increasing the credit score is the most important step to get rid off this destructive situation . An expert can guide anyone in this situation fairly and if his advices come free then it is better.

Avoiding bankruptcy is the key of any good credit score sheet.

Bankruptcy is the single worst thing that will destroy ones credit score. Bankruptcy will lower the persons credit score by 200 points or more and is very difficult to come back from.

Once a persons credit score falls below 620, any loan he/she get will be far more expensive. A bankruptcy on a credit record is reported for up to 10 years.

And the importance of credit score to get credit and credit card anywhere in the world is unavoidable.

The FICO or credit score ranges are broken down as follows:

720-850 - This represent the best score range

700-719 – Able to obtain favorable financing terms

675-699- This is still a decent score range

620-674 – May have trouble obtaining favorable credit terms

560-619 – May have trouble obtaining credit

500-559 – Time to improve your score

Ones credit score is broken down into 5 distinct categories each with their own importance based on a percentile. The 5 categories and the percentage they represent I relation to his/her credit score are as follows:

Payment History – 35%

Amounts Owed – 30%

Length of Credit History – 15%

New Credit – 10%

Types of Credit Used – 10%

Ones payment history contains information on credit cards, retail accounts, installment loans, finance company accounts and any mortgages he/she may have had. It also details any past due accounts and the amount owed on him. He will also find bankruptcy information as well as other adverse information in regards to his credit history. This is why it warrants a 35% piece of the pie.

So , it is important to increase credit score even if one have good credit and must if one have bad credit and one should avoid bankruptcy as far as possible with help of a credit consultant .

My next topic will be about how to avoid bankruptcy and wahat are the alternatives of bankruptcy.