Financial Literacy - Credit savvy
credit cards
Your post-bankruptcy credit score

Key features to look for in a secured credit card
  • Understand eligibility requirements. Some card issuers may not give you a card if your bankruptcy is too recent.
  • Look for low annual fees, reasonable interest rates and reasonable service charges.
  • Make sure the card reports to at least one of the three major credit bureaus. A card that reports to all three is better.
  • Deposits should be FDIC-insured.

Consumers should also be wary of unsecured credit card offers that come in the mail. Many of those are likely to have unfavorable terms and may not help boost your credit score in the long term.

"Those cards were designed for people with bad credit to remain in very low-credit-limit situations for a long period of time at a high interest rate," says Stephen Snyder, author of "Credit After Bankruptcy."

"The whole idea in getting a credit card after bankruptcy is to prove that you are creditworthy again and to get as high a credit limit as possible with the lowest interest rate. You're not really going to accomplish that with some of those unsecured card offers."

With a positive payment history and no other negative credit blemishes, you could graduate to an unsecured credit card in a few years, according to Snyder.

4. Get an auto loan

Getting a post-bankruptcy auto loan without an exorbitant interest rate can be tricky, but if you've been repaying your credit accounts on time and keeping your overall utilization ratio low, experts say it's possible to rebuild your credit score to a respectable level within two or three years.

"Within a couple of years you could have a score maybe over 650," says personal finance expert Emily Peters of Credit.com. "A couple of years of due diligence will work."

Auto loans are a logical next step toward rebuilding your credit because the loan is secured by the car, and lately, some auto lenders are more willing to give loans to people with less than perfect scores, she says.

For example, GMAC Financial Services announced in late December that it will extend credit to buyers with credit scores as low as 621. The previous floor was 700. And it's not uncommon to see signs on car lots that say, "Bad credit? No problem!" These are desperate times for car dealers, after all.

But consumers still need to be just as wary about auto loan terms as they are with credit card terms because although you may be offered a loan, it doesn't necessarily mean you'll be getting a great deal. Be sure to shop around.

In January, the average interest rate for a 36-month new car loan for buyers with credit scores between 500 and 589 was 16.52 percent, according to MyFico. That would mean a monthly payment as high as $708 on a $20,000 auto loan.

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"You're going to get a lot of offers in the mail, but take a look at what's out there and make some smart decisions," Peters says. "You don't want to get into something like a 32 percent car loan just to rebuild your credit."

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