Financial Literacy - Credit savvy
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Your post-bankruptcy credit score

5. Bide your time

Generally, the more time that has elapsed since your bankruptcy discharge and the faster you establish a positive payment history, the quicker your credit score will start inching out of the basement.

The payoff to your credit score can come relatively quickly with the right financial management practices. That's why it's critical to start establishing positive credit lines immediately.

"If you're doing all the right things, like staying current on payment obligations, opening new payment obligations and performing well on them, and keeping your balances low relative to your credit limit, your score can rebound from bankruptcy to a decent level where you can start qualifying for (unsecured) credit in around three years," says Ethan Dornhelm, principal scientist at FICO Scoring Solutions Division.

But Dornhelm cautions that in this credit environment it could take longer than a few years to boost your credit score to acceptable levels if lenders remain skittish and keep raising scoring standards.

6. Mix it up with multiple credit lines

Having more than one type of credit line will help boost your credit score.

"You want to have a nice mix of revolving charges and installment charges," says Dee E. Hoffman, executive director of the National Credit Restoration Alliance in Conroe, Texas.

"The point is most people with great credit scores probably have two credit cards from well-known, well-respected banks, a house payment, maybe a boat payment, and they keep those balances below 15 percent (of available credit) every month."

About 10 percent of your credit score is calculated based on the types of credit you use (i.e., credit cards, mortgages, installment loans and retail accounts), according to MyFICO.com.

Another 10 percent is based on new credit accounts -- which can include credit lines established following your bankruptcy. However, exercise caution when opening too many new accounts all at once because you could potentially lower your credit score by lowering the average age of your credit accounts. This is especially true for consumers who went into bankruptcy with already thin credit files.

What affects your score

Post-bankruptcy consumers may want to avoid retail accounts because they usually have low credit limits and can get the cardholder into high utilization ratios very quickly, according to Hoffman.

"Unless that's the only card you can get, I would advise not getting it unless you can go in there and charge a cheap item and pay it off each month," he says.

Stephen Snyder, credit expert and author of "Credit After Bankruptcy," believes retail cards may be useful.

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"I've always pooh-poohed retail credit because it's a small part of the credit mix and the interest rates are high, but it's important to have the right mix for your scores," says Snyder. "I'm low key on retail but it's still important to getting back your credit score."

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