Your Bankruptcy Risk Score

What's Your Bankruptcy Risk

Here's another thing to worry about when shopping for credit.

A little know factor in determining your credit worthiness is becoming more widely known.

Called the Bankruptcy Risk Score, its purpose is to predict whether the potential borrower is also a potential bankrupt.

This score has been used by banks for years, but has not been generally available to the borrowing public. One of its main uses was to allow banks to more precisely reserve against potential bad debt.

The factors that contribute to your credit score also contribute to the bankruptcy risk score, but in a slightly different way. The bankruptcy risk score starts off as a low, or even negative number, and grows along with the risk, so while you want a high credit score, you want as low a bankruptcy risk score as you can achieve.

Things that will increase you bankruptcy risk score will lower you credit score. So avoid missed and late payments, use only a portion of your available credit, don't apply for a lot of credit at once - in other words all the things you do to lower your credit score will also raise your bankruptcy risk score.

While this number has not be available to the public before, one of the major credit reporting agencies, Experian, is considering selling it to consumers.

However from the nature of the scoring method, it would seem that this is not really vital - or at least not easily determined - information. If you already know your credit score, you should have a pretty good idea of you bankruptcy risk score without having to pay for it.

If you credit score is low, you know your bankruptcy score is high, so save the money and use it to pay off some debt.