A bankruptcy risk score is a number that indicates the likelihood of an individual filing for bankruptcy. Although it has been used for over twenty years to assess risk in lending, few consumers know of it. It is related to the better-known

credit score A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit ...

, but unlike credit scores, bankruptcy risk scores are not sold to consumers by any of the

credit bureau A credit bureau is a data collection agency that gathers account information from various creditors and provides that information to a consumer reporting agency in the United States, a credit reference agency in the United Kingdom, a credit repor ...

s. Consequentially, individuals have little or no way of knowing what their bankruptcy risk scores are or how to improve upon them. Furthermore, since there is no standardized index of measurement, consumers often have trouble contextualizing their score on a standardized scale, instead only receiving general information from a single bureau. This is also referred to as debt analysis which allows lenders the ability to assess a customers' risk in taking out a loan. One can improve their score by paying bills on time, keeping balances low, and having few revolving accounts.

Equifax Equifax Inc. is an American multinational consumer credit reporting agency headquartered in Atlanta, Georgia and is one of the three largest consumer credit reporting agencies, along with Experian and TransUnion (together known as the "Big Thr ...

, a US credit bureau, offers a bankruptcy risk score called Bankruptcy Navigator Index to its commercial clients. The BNI 4.0 considers a consumers credit balances versus credit limits as the most heavily weighted factor. It has a scoring range starting at 1 (low) and ends at 600 (high) with lower scores being a greater risk for filing for bankruptcy within the next 2 years. Most credit card issuers do not disclose the use of BNI on a letter of denial and it is difficult for consumers to know their score.

References

{{reflist Personal finance