Bankruptcy scores predict the likelihood that a consumer will file for bankruptcy – either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
Some people get confused and think that bankruptcy scores are the same as credit risk scores -- they’re not. Credit risk scores are designed to predict the likelihood that you will pay your bills poorly but not necessarily so badly that you’d end up needing to file for bankruptcy.
As you can imagine, if you are more likely to file for bankruptcy, lenders will be less likely to approve your application.
There are many different types of bankruptcy scores, but the most commonly used actually predict whether or not you will file. Some also predict how much a lender would lose if you filed for bankruptcy.
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