The Bankruptcy Abuse Prevention and Consumer Protection Act requires consumers to complete an approved credit counseling session prior to filing for bankruptcy. After filing, debtors must complete an approved financial education course before they can discharge their debts. These requirements were included to ensure consumers make an informed choice about bankruptcy, its alternatives and consequences. Perhaps more importantly, they were designed to provide bankruptcy filers with the financial skills necessary to build a strong financial foundation and avoid future financial problems.

Filing for bankruptcy protection can impact your credit report and score for up to 10 years. The good news is that no matter how bad things look, you can always bounce back and re-establish a good credit score. Following are some ways to re-build credit after bankruptcy.

Pay yourself first. Unfortunately, bad things sometimes happen to good people. Expect the unexpected and put money away for the rainy days. Having an emergency fund can keep a minor financial setback from turning into a major financial crisis.

Clean up your credit report. It’s important to take the necessary steps to dispute any incorrect information on your credit report. Visit AnnualCreditReport.com for one free annual credit report from each of the three major bureaus.

Get a secured line of credit. Obtaining new credit (with reasonable repayment terms) after a bankruptcy can be difficult. Consider a secured account or a small personal loan with a bank or credit union if traditional lines prove to be too costly.

Use credit wisely. Credit cards are useful, but should only be used as a tool of convenience and not as an extension of your income. Always have a plan for payoff when making purchases with credit cards; ideally less than 90 days.

Pay bills on time. Create a calendar with due dates and payment amounts. Set up automatic payments with your bank to ensure timely delivery. Also, don’t neglect creditors such as the phone and utility companies. Many people don’t realize these are creditors too.

When trying to reestablish credit, it pays to be persistent and patient. The good news is that scores are continually updated and may move several points each month.

There are multiple reasons why people may want to establish new credit. They may be new entrants into the world of credit, or are perhaps trying to reestablish credit after a financial hiccup. Either way, there are some do’s and don’ts that consumers should follow that will make the road to credit much smoother.

Do obtain a copy of your credit report from AnnualCreditReport.com. This is particularly useful if you are trying to rebuild your credit, as you’ll want to review what existing debts you need to satisfy before moving forward.

Do open checking and savings accounts. Even though this activity is usually not reported to the credit bureaus, lenders may inquire about the presence of such accounts on credit applications, thus it can count in your favor.

Don’t apply for too much credit at once. This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you. Further, too many credit inquiries can have a negative impact on your credit score.

Do apply for a variety of credit types. Credit scoring models value having different types of credit. Therefore, having some revolving accounts (typically credit cards) and some installment fixed payment loans (such as a car payment) can improve your score.

Do research the type of card that is right for you. Each issuer has different lending standards (yes, a credit card is a loan), so you’ll only want to apply for cards from those whose lending profile you fit. Familiarize yourself with the various standards by going to CreditCards.com or Bankrate.com.

Don’t fall for a credit repair scheme. Why pay for something that you can do for yourself for free? If rebuilding credit, know that time is your friend, as the farther you move away from the financial distress, the less negative impact it has. Follow with responsible behavior with your new credit, and you’ll soon have a solid credit file.

Don’t pay to piggyback. Piggybacking is a legitimate way to build a credit history, but only if you use it as it was intended. This tool allows someone with existing credit to add an authorized user to their account. The credit activity is then reported in the primary cardholder’s name as well as the authorized user’s name. Examples are adding a young adult on the parent’s card, or a spouse on the other spouse’s card. The wrongful use of piggybacking would be when strangers utilize this method, typically for money.

Do consider a co-signer. Obtaining a loan in the absence of any credit history can be difficult, sometimes requiring a co-signer to guarantee payment. The loan is usually structured where the primary borrower is expected to make the payment, with the pay history reported in both names. If the borrower defaults, the lender will approach the co-signer, and missed payments will be reflected on both credit files. There is somewhat of a risk to the co-signer, but if handled responsibly, co-signing can be an effective way to help another person obtain and build credit.

Do consider a secured credit card. This type of account is secured by a deposit made to the financial institution issuing the card. For example, if you wanted a card with a $500 limit, you would deposit that amount with the bank offering you the card. Know, however, that secured cards can have fees attached to them, and typically have a higher interest rate. The account activity is reported to the credit bureaus each month, and after responsibly making payments on a secured card, the issuer often offers the borrower an unsecured card.

Do take out a small loan. A personal loan from a bank or credit union can serve to establish credit. You may be asked to put up collateral, but it will be worth it in order to build your credit.

Equally as important as establishing credit is treating it responsibly. Paying your bills on time all the time ensures that you enjoy all the benefits of credit.

This post was provided by The National Foundation for Credit Counseling (NFCC). Money Management International is a member of the NFCC.

Our organization is asked to participate in media opportunities on a regular basis. Before each interview, we like to prepare by researching the latest financial statistics. Here are seven of my go-to Web sites for speedy stats:

-Census.gov: Facts for Features. This is a great resource for finding fun facts like the dollar value of U.S. imports of American flags ($3.4 million in 2008).

-CreditCards.com. Comprehensive list of statistics including numbers on credit card debt, credit card delinquencies, credit scores, credit card interest rates, bankruptcies, and more.

-MyFICO.com: Credit Education Center. Fair Issac analyzed a representative national sample of millions of consumer credit profiles to discover the average use of credit by today’s consumers.

-NationalRetailFederation.com: Consumer Trend Data. Great statistics beautifully broken down into timely topics such as Father’s Day and Back to College.

-NEFE.org: NEFE Research. In-depth exploration of financial issues. Featuring the results of the “Young and In Debt” study launched by the National Endowment for Financial Education and USA TODAY®.

-PersonalFinanceFoundation.org: Research. A great site for looking at the impacts of financial problems on employees and employers.

-YACenter.org: Financial Literacy Statistics. Statistics compiled by the Young Americans Center for Financial Literacy on the state of financial literacy in America today.

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