The Frugal Creditnista

Help! Bankruptcy Was Deleted & My Credit Score Dropped!

Q & A Friday:

Q:  I filed bankruptcy in 2013. I am working with a company who was able to remove it because something was reporting wrong on it. The problem is my credit dropped over 30 points!  I don't understand, I have opened up 2 credit cards since filing, but everything else is pretty much clean.  She doesn't know what's wrong either, HELP!

A;  Well, this can happen sometimes.  Our scores are all about assessing our risk of defaulting on a loan to lenders. A way for FICO (or any other scoring model) to accomplish this is by comparing our credit behaviors to others with similar items reporting on their credit report via scorecards.  Some credit professionals refer to this as Scoring Buckets.  There's one for people who've filed bankruptcy, one for those with serious negatives reporting (collections, charge offs) etc.

Basically, when you were in the ‘People Who've Filed Bankruptcy' scoring bucket, your were being compared to the credit habits of other consumers who've filed for bankruptcy and you must've been doing pretty good.

Now that the bankruptcy is gone, you are in another scoring bucket (I can't tell you which one without looking at your report, there's about 10-12 of them) and based on the payment history, length of your credit history, etc you aren't comparing too fairly.

This is why we have to be careful about going after every single negative thing reporting on our credit report.  I won't say the bankruptcy was ‘helping' you, but because your credit history is so limited (you mentioned you only have 2 new cards), it was keeping your score higher than what you are experiencing now.

I'd just focus on rebuilding and let the new accounts you open start working in your favor; in your case it's just a matter of time.

You can speed things up by obtaining an authorized user account with a long payment history and an under 7-10% credit utilization.

Hope this helps 🙂

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