Tips, News and Advice from Credit Card Assist

Understanding Credit Scorecards

by shannon on July 3, 2007

Believe it or, having your bankruptcy fall off your credit report can actually cause your credit score to take a hit.  The reason is because having your bankruptcy removed from your credit report will cause you to change what is known as your credit scorecard.

Credit scorecards are different groups that consumers are divvied into for the purpose of the FICO scoring system.  These groupings are made according to the histories that consumers have.  Those consumers with similar histories are grouped together. Therefore, if you have a bankruptcy on your credit report, you will be grouped with others that have also filed for bankruptcy.

As you work toward getting your finances back under control after filing for bankruptcy, you will begin to see an improvement in your score.  If others sharing your same scorecard are not handling themselves as responsibly as you, you will start to look pretty good when compared to your company.  Once that bankruptcy falls off, however, you will be made part of a new scorecard.  When compared to this group of consumers, your financial habits may not look quite so good. 

Even opening a new credit card account can change your scorecard.  After the new credit card account is no longer quite so new, however, you will find yourself placed with a group of different consumers.  These changes can also have an effect on your score. 

One woman, for example, experienced an increase in her score after having opened a new account.  Her score rose to 726 over the next several months.  When the account became “old” and she was placed on a different scorecard, she found that her score dropped to 686.  The fact that she was carrying a high debt did not hurt her as much when she was in the group of new credit cardholders, but it packed a whollop when her scorecard changed.

Unfortunately, there is not a whole lot you can do about this problem.  Just be aware of it and plan your loan applications accordingly.

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