Bankruptcy Score

Understanding Your Bankruptcy Score: A Comprehensive Guide

Have you ever wondered about the intricacies of your credit score and how it impacts your financial life? Most people are conscious of their credit rating’s significance in securing loans and the interest rates they’ll incur. However, a less known aspect that lenders now consider is your bankruptcy score. This score is instrumental in determining if you’re a potential bankruptcy risk.

Decoding the Bankruptcy Score

As the reliance on credit amplifies, lenders are seeking additional tools to mitigate risk while extending more loans. They’ve identified a distinctive behavioral difference between a person with bad credit who won’t declare bankruptcy and someone with comparable poor credit who will. This is precisely what the bankruptcy score quantifies.

A person predicted to declare bankruptcy exhibits different credit behavior than an average bad credit borrower. The likely bankrupt individual:


  • Utilizes credit more frequently,
  • Applies for credit more often,
  • Has fewer accounts in collections,
  • Possesses a higher credit utilization rate,
  • Maintains more new accounts.


This implies that a potential bankrupt individual has a more dynamic credit history than someone with a history of defaulting on their existing accounts. As a result, credit bureaus have established new credit risk models that emphasize credit utilization, recent delinquencies, and recent inquiries.

Equifax, for instance, offers a bankruptcy score to lenders via the Bankruptcy Navigator Index (BNI). This model “Predicts the likelihood of a consumer becoming bankrupt within the next 24 months”. However, BNI is just one of many such models. Unlike traditional credit scores, these bankruptcy scores lack uniformity, are complex to comprehend, and are not readily accessible for average consumers.

Implications of the Bankruptcy Score on Your Creditworthiness

Your bankruptcy score can influence your creditworthiness in two ways:


  1. Despite a ‘good credit‘ status, you might be denied a loan.
  2. If deemed close to bankruptcy, lenders may increase your interest rate using the bankruptcy score.


These risk factors align with behaviors exhibited by individuals on the brink of bankruptcy and serve as early debt warning signs.


If lenders reject your credit applications due to high bankruptcy risk, your ‘good’ credit score becomes inconsequential.

If you delay filing bankruptcy or proposing to a consumer, and your lender hikes your interest rate viewing you as a bankruptcy risk, postponing the filing only increases your interest payment.

Resorting to costly alternative borrowing options intended for bad credit borrowers as a result of credit denial isn’t a viable solution to your credit problem.

While concerns about how bankruptcy will affect your traditional credit score are valid, filing for bankruptcy or making a consumer proposal may be the key to rectifying your high-risk credit behavior and starting afresh.

Improving your score, whether it’s your credit score or bankruptcy score, involves more than just a quick fix. Merely securing a couple of new loans may not significantly impact your ability to qualify for a lower interest loan. Instead, focus on enhancing good borrowing practices that will bolster both scores:


  • Maintain low balances concerning your credit limit and your income,
  • Pay all bills in full and on time,
  • Limit the number of loans you have,
  • Avoid making frequent applications,
  • Utilize appropriate forms of credit.


Borrowing and lending are becoming increasingly complex, a trend unlikely to change. Nevertheless, building a healthy debt profile should keep you in good stead.

If you’re burdened with excessive debt, consider reaching out to a Licensed Insolvency Trustee like Bankruptcy Canada for a free consultation. Eliminating overwhelming debt is often the initial step in mending your credit, and they can guide you with options that allow you to avoid bankruptcy.

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