Financial Literacy - Credit savvy
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Your post-bankruptcy credit score

Filing for bankruptcy is not a decision most people take lightly, especially since it affects access to new credit, home loans and even employment opportunities, not to mention the emotional impact filing for bankruptcy can have.

Nevertheless, more than 1 million consumers filed for bankruptcy during the 12-month period ending September 30, 2008, according to federal court statistics released in December. This compares to 775,344 filings over the same period the year before.

Bankruptcies can remain on your credit report for up to 10 years and can decimate your credit score by hundreds of points. But by adopting these strategies, you could boost your credit score and become creditworthy several years before the bankruptcy drops off your credit report.

7 steps to a higher credit score
  1. Take a reality check
  2. Check your credit reports
  3. Obtain a secured credit card
  4. Get an auto loan
  5. Bide your time
  6. Get multiple credit lines
  7. Be wary of credit repair services

1. Take a reality check

Rebuilding your credit score after a bankruptcy is far from being pain-free. It entails making an honest assessment of the reasons you filed in the first place and then taking action to establish positive lines of credit.

People claim bankruptcy for a number of different reasons. Job loss, serious illness and relying too much on credit all rank high on the list.

Regardless of the reason you wind up filing for bankruptcy, if you don't do a thorough self-assessment of what went wrong, you could end up repeating the same behavior that got you into trouble in the first place -- especially if it was due to financial mismanagement.

"Filing bankruptcy is supposed to be a fresh start," says Stephen Snyder, credit expert and author of "Credit After Bankruptcy."

"But in order to take advantage of the fresh start, you need to say, 'OK, I overextended myself. I bought a Mercedes when I should have bought a Ford. My lifestyle was out of proportion. I need to scale back and live within my means.'"

Although there's not much you can do when an unexpected illness or job loss drains your finances, certain voluntary spending habits should be avoided.

Compulsive behaviors that involve wagering sometimes get people into trouble with debt and can precipitate a bankruptcy.

"When I ask people what got you into this problem and they say 'gambling' and they live in Las Vegas, I tell them, 'You need to move somewhere else. Because it's just a matter of time that you're back in the same place,'" Snyder says.

Similarly, the serial entrepreneur, who, despite repeated failure, insists on managing his own business to the detriment of his financial well-being, should probably assess the alternatives.

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That individual, Snyder says, would probably do well to "consider getting a regular full-time job."

"If they don't fix that (source of financial problems), it's just going to be a vicious circle that's going to get worse and worse and worse."

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