Generation X is one of the identified generations, for those ages 30 through 46, and what is surprising is that they led the way in average total debt. They included all debts in this calculation, from student loan to credit card to mortgage loans, and Generation X led the way. In a close second place were the Baby Boomers, who are the next oldest generation at ages 47 through 65.

Experian found that Generation X had 42% more total debt compared to other generations, which isn’t surprising because it’s around that age where you start really taking on debt in the form of a mortgage. A quick peek at Generation Y, ages 19 through 29, and you’ll see that it’s likely that high student and auto loans carried over and, when coupled with mortgage loans, led to the higher debt load.

Another statistic that was staggering was how prevalent student loans were for Generation Y – an amazing 420% over average. This can be attributed to age, younger people are more likely to still have student loans, and the rising cost of education. With fewer years since graduation, it’s not surprising that many Gen Yers have a lot of student loan debt.

In looking at credit scores, it’s not surprising that the older you are, the better your score. While your age isn’t a factor in determining your credit score, many of the factors that do make an impact are affected by time. The longer your account history and payment history, to the extent you have good behavior, the better your score. The older you are, the more time you have to build that history of good credit behavior. I don’t usually take much stock in VantageScore but since FICO is governed by Fair Isaac, I have to assume Experian didn’t have access to that data to make a comparison based on that.

Finally, the fact that the Greatest Generation, aged 66 and above, still had nearly $40,000 in debt was somewhat scary. While the bulk of that was in 1st and 2nd mortgages, it’s still surprising to see someone in retirement having to service such a high level of debt. It could just be the product of the environment, it’s easy to have a mortgage with interest rates so low, but perhaps that’s a trend we could see diminish over time.

The infographic contains just the highest level data they collected, they put up a new site at livecreditsmart.com that contains some more information for those stats junkies out there (such as the highest credit scoring cities and states, trends, etc.).

What statistics did you find interesting from the infographic?

These prepaid debit cards are notoriously marketed toward those on the lower end of the economic spectrum because these people often can’t open or maintain accounts at a traditional bank for a variety of reasons. Without a bank, and therefore a checking account and debit card, these prepaid cards can be used to store money in lieu of a bank and also be used for making purchases, obtaining cash at an ATM, and so on. But like everything, this doesn’t come without a cost. The company offering these products need to make money somehow, so it usually means charging fees.

Well, this is where things get interesting. Suze has long been a champion of getting out of debt, being smart with your money, and avoiding excessive fees. Unfortunately, she wants you to use her card that comes stacked with fees. Let me run through a few of them.

• $3.00 to purchase the card
• $3.00 per month just to have the card (first month’s fee is waived)
• $2.00 for ATM withdrawals (generally) plus ATM fees
• $1.00 for a balance inquiry
• $2.00 to speak to customer service (you get one free call per month)
• $2.00 for paper statement

Ok, so there are a few of the fees most users would find themselves subject to, although there are others. You can see all the fees here. Now, one might argue that these fees are better than what some other prepaid debit cards charge, and that is generally the case. But these products as a whole are not consumer-friendly by any stretch of the imagination. I mean is this a debit card or am I going to jail? I only get one free phone call for crying out loud!

The thing to keep in mind here is that the typical person using a card like this is not going to be loading it up with thousands of dollars. Because the amounts will generally be lower, these fees can add up and put a dent in the balance. Here’s an example:

Let’s assume somebody buys this card and loads it up with $250 from their paycheck to have some spending money. They will get charged $3.00 to obtain the card. Then you can figure the person will probably go to the ATM for cash maybe once a week. If they don’t have direct deposit set up or it’s done on a non-Allpoint machine it will be a $2.00 fee for each withdrawal, so that’s another $8.00. Don’t forget to add the $2-3 fee the ATM operator will charge as well. Doing the math, in the first month doing nothing more than obtaining the card and making a few withdrawals this person would be charged upwards of $20 in fees. If the balance remained around $250 for the month they are essentially being charged 8% in fees.  Is it better than a high-interest credit card? Sure. But when you’re talking about a segment of the population that might be only keeping a couple hundred dollars on the card, just regular use and a few withdrawals every month could basically mean they are being charged 10% to use their own money, and could amount to a few hundred dollars a year in fees.

Beyond the Fees

The fees are obviously what many people will focus on, but there is more to it than that. Suze is marketing this card as a revolutionary new way to build credit. One feature is that you get unlimited access to your credit report. The problem is it’s only through TransUnion and it doesn’t include the almighty credit or FICO score that she talks about ad nauseum because of her association with it. Besides, you can already get free credit reports each year from all three of the credit bureaus, so this “feature” isn’t much of a benefit for most people. But the real kicker is that some claims are being made that this card can help you build credit by reporting your spending to TransUnion. The problem is when you read the fine print in the terms:

The information we share with TransUnion concerning your Approved Card account will not appear in your credit report.

When asked about this, a company spokesperson said:

The Approved Card from Suze Orman is trying to transform the way the credit bureaus view Americans’ spending habits. This is an experiment and we won’t know for 18 to 24 months whether people will be able to get credit for responsibly handling their money.

This is interesting. So basically Suze Orman is running an experiment on real people and their money? She’s promising consumers that this debit card is different because they are sharing some information with TransUnion, yet there’s no guarantee it will really work. And even if it would somehow change the way credit reporting is done we won’t know for two years. Now I’m no expert in this area, but it seems like putting the cart before the horse. Rather than experiment with real people, largely those already in a less than stellar financial situation, I’d like to see an agreement in place with the credit bureaus about how they will use the data before just hoping it will make a difference.

From the Approved Card’s website:

As part of this project we are sharing your Approved Card purchase, payment and other transaction information with TransUnion so that they can help us understand the correlation between that information and the information that is currently included in most consumer credit reports. The transaction data we are providing to TransUnion is not attributed or identifiable to you or any other Approved Cardholder.

As you can see, all the data about your spending is completely anonymous. So even if this project did in fact pave the way to new credit reporting standards, none of your spending history tied to this card would ever have an impact on your personal credit because the data they received was not attributed or identifiable to you.

The bottom line is if you’re looking for a way to build a credit history because you don’t otherwise have access to lines of credit you’re much better off going with a secured credit card instead. These work almost exactly the same as this and other prepaid debit cards, and as long as you put money on the card anyone can get one.

Suze Turns on Bloggers

The card itself as outlined above isn’t necessarily good, nor is it incredibly bad. It’s just an odd financial product that has a limited market and makes a few dubious assumptions. The issue some reporters and financial bloggers have taken up is that this card is being put out there by Suze Orman, who has long provided financial advice for the middle class, helped people get out of debt, and make better choices with their money. Obviously, hawking a prepaid debit card stacked with fees, targeting people without a lot of money, and suggesting it may help build credit like never before, has irked a few people and they questioned her motives on blogs and on twitter.

This is where things get ugly. Suze has resorted to name calling. Two personal finance bloggers, PT Money and Briana, have taken the brunt of her insults. You can read many tweets there, but these are the two that sort of stood out:

Many others began jumping in on that discussion last night and it devolved into a bunch of “you’re wrong!” tweets along with links to any article that spoke favorably of the Approved card. Of course, Suze made sure to point out that those articles were written by “legit” reporters, so clearly she doesn’t have any respect for people covering finance unless they work at a major media outlet.

Either way, I found last night’s twitter discussion very uncouth, even for Suze. She is known for her no-nonsense attitude on her show, but what happened here was over the top. She has done a good job of turning some fans off. Think she will come to the 2012 Financial Blogger Conference? Or maybe the Approved Card will be a sponsor. That would be interesting. Of course, we aren’t legit and I’m sure she wouldn’t want to be caught dead being around a few hundred nobodies.

So, what do you think? Either about the card or Suze’s reaction to disagreeing bloggers?

Don’t know which actions to watch out for?  Avoid these credit killing mistakes and you will certainly improve your credit score.

1. Late payments

Delaying or skipping a credit card payment will hurt your credit score significantly.  Place yourself in the place of a lender.  If a potential borrower has a history of being late on payments would you want to be lending credit to them?  I know I wouldn’t.  Never skip a bill.  In fact, I recommend automatic bill pay so you never miss a payment.

2. Defaulting

Whether it is a car loan or college loan, defaulting will wreck your credit score.  It’s a very simple concept:  You have agreed to a contact and now you are failing to meet your obligations.  Result?  Default and your credit score plunges and if it’s a secured loan, property may be repossessed in addition.  Lesson?  Manage your money well and always make good on your debt payments. Ultimately, this simply means only borrow what you can afford to pay back.

3. Bankruptcy

With a slumping economy and small businesses going under all around us, bankruptcy is a serious reality for many people.  Unfortunately, bankruptcy has a serious negative impact on your credit score.  You should seek out alternatives to bankruptcy, because it is extremely hard to get your credit score back to where it once was. If bankruptcy seems to be your only option it could be time to look at negotiating your debt or settle some for a lesser amount. While those also aren’t good for your credit it’s better than bankruptcy.

4. One too many in-store credit cards

I know it’s tempting to open store cards for extra discount this time of year, but try to avoid the urge.  Credit agencies will see this as a credit risk and notch your score down.  Even if you pay them off immediately, it can be looked at as a negative in terms of “credit worthiness.”

5. Maxing out a credit card

It might appear to be common sense, but people still do it.  Again, this goes back to what the creditor thinks about your credit worthiness.  Maxing out a credit card is not only foolish, but takes away trust that a creditor has in you.  Avoid this by only spending 25% of your maximum credit limit if you can.

6. Closing credit cards

The length of your credit history is a large percentage of your credit score.  The longer your credit history, the higher your credit score will be.  Avoid closing your oldest card, and only consider closing your most recent cards if you have a reason to close any.

7. Applying for multiple cards

Did you know that each time you apply for a credit card your credit score may be dinged slightly?  If you plan on opening multiple credit cards, try to space them out.  For example, I will only open two cards a year.  I open travel reward cards for the bonus miles, however I keep myself patient and just wait for the next year to open an additional card if a better offer comes around.

8. Charging off an account

If you are regularly very late on payments or start getting too far behind, a lender may “charge off” the account.  Basically, a creditor will charge off your account if they think you have no hope of paying back your debt.  You can avoid this by living within your means and not getting yourself into a bad situation in the first place.

9. Foreclosure

A foreclosure will  also impact your credit score.  A foreclosure shows credit companies that you are not responsible with your money and therefore you deserve a lower credit score.  Avoid this situation by buying only enough house for your needs and stay clear of home equity loans.  Leave the extravagance for your friends.

10. Bad spending habits

This one sneaks up on most people without them realizing it.  The basic rule of thumb on this one is to never spend over 25% of your credit limit on a credit card.  A portion of your credit score is based off of “credit utilization.”  You want to avoid the appearance of irresponsible credit use. Just like having a maxed out card sends a bad message, so does constantly carrying a high balance, even if it isn’t maxed out.

There you go folks, a quick run through some of those most common mistake to avoid when it comes to your credit score.  A credit score is connected to so many things in our lives, so protecting it should be a priority. Even getting that next job may depend on it.

Of course you can ask the lending institution why they put the kibosh on your application but they won’t likely tell you the complete story because they are afraid you’ll sue them. There are many factors that the bank considers when deciding whether or not to grant you the loan.

Some of these reasons may have nothing to do with you at all. The bank has its own guidelines and they’ll never share them with you as I said. But regardless, one of the most important considerations is your credit score. And as you’ll see, you can do plenty about that.

But let’s get back to business. You’ve received your loan rejections letter, now what do you do?

First, decide if you want to try to go forward with the purchase anyway. If so, this will require you to find financing alternatives. One good option is getting the seller to carry the mortgage. Even if you have bad credit you still might be able to achieve this. That’s because interest rates are so low right now, sellers might be very interested in getting more than 1% on their money. Of course this will probably work best if you provide a significant down payment on the purchase. But if the seller is very motivated, he or she might be willing to provide financing without a substantial down payment.

Another path is to work with “hard money lenders” (firms that loan money to distressed buyers) charge enormously high fees and interest rates. If that is the only path available to you, I’d suggest you follow the steps below and reapply later on. Don’t ever take hard money loans if you can avoid it �’ even if it means you don’t buy the property. Usurious rates are almost never worth paying.

Regardless of your decision to go ahead with the purchase or not, you should do everything possible to make yourself a more attractive borrower.

1. Check your credit score and report.

Are there any errors on your report? If so, you can correct credit report errors yourself in many cases. But the only way you’ll know if there are errors is if you first get a hold of your report. Fortunately, you can do that easily. There are even ways to get your free credit score without using a credit card.

2. Start building a high credit score

You will need to improve your credit score. Make sure you don’t carry a credit card balance every month. Pay off your consumer debt every month on time. If you need to consolidate your debt, consider doing so by using a peer-to-peer lending company like Lending Club. This is a great way to pay off high cost credit card debt and get a lower monthly payment and lower interest rate.

3. Fall in love with your job

One fear that banks have is when a borrower changes jobs often. It demonstrates instability and higher risk. Your best bet is to stick with your job for at least 3 years in order to garner maximum brownie points with lenders. Oh…and keeping a job is also a great way to stay out of debt too. Nice side benefit. The younger you are, the more forgiving the banks are when it comes to job stability. Take this to mean that as you get older, lenders will look for more than 3 years. Conclusion? Don’t take jobs you don’t think you’ll keep. This goes for folks without a college diploma. You can still find great jobs without a college degree.

4. Don’t live with flakes

If someone in your house is a deadbeat, your address might be flagged and that might be at least partially responsible for your loan rejection. If someone who lives at your home didn’t make a credit card payment or payment on another loan, that’s probably been reported to one of the three credit bureaus and you’re going to get twisted for it.

Either ask the person who is casting a giant shadow on your loan app to move out or explain to the bank manager that this person is in no way financially associated with you �’ assuming that’s true.

5. Round Peg – Square Hole

Each bank has its own lending policies as I said above. That means they decide what kind of loans they want to make to which kinds of people. For reasons they’ll never explain, you may not fit their profile. So if you get a loan rejected and can’t understand why, go speak to the manager. Ask her if the decision would be positive if you are able to pony up more security. You could get someone to guarantee your loan or be a co-borrower. You could also offer collateral.

Bottom line? Try to find out as much as you can as to why your loan was rejected. Clean up any errors on your credit report, take steps outlined above to improve your credit score and go back and try again.

This is a guest post from Neal Frankle. He is A Certified Financial Planner in Los Angeles. He is also the owner of Wealth Pilgrim, a top-notch personal finance blog.

Your credit score comes from your credit report, so it’s important to understand that in order to improve your credit score you must first improve your credit history. Think of it this way. Remember when you were in school or college? You received individual scores or grades on assignments and then received a final grade at the end of the year. All of your assignments throughout the course of that semester or year are like items on your credit report. Some received good scores, and some may have been bad scores. But all of those assignments come together to give you a final grade, which is how your credit score is calculated. Remember sleeping through that freshman math midterm that brought your entire grade down by 25%? That’s like missing a payment on your credit card or other loan.

Checking Your Credit Report

There are two good reasons to check your credit report. For one, you simply want to make sure the lenders on your account are reporting information correctly. Mistakes can and do happen. Maybe you’ve sent in all of your auto loan payments in on time but for some reason they are reporting a late or missing payment. That’s a big mistake and could cost you qualification on a future loan, or get you higher interest rates elsewhere. A simple mistake like that could really hurt.

The other reason to check your credit report is to spot identity theft. Identity theft can be a silent crime until it’s too late. A criminal may have obtained your information and opened up a credit card in your name and you’d never know unless you spotted it on your credit report. So checking your report at least once a year is a good way to make sure nothing fishy is showing up. The sooner you can catch a problem, the better.

You can get your credit reports for free each year. Just head on over to annualcreditreport.com and use their secure site to verify your information. When you receive your report it may be a little overwhelming at first, but the site will guide you through the data and you’ll see what’s most important. If errors do arise, be sure to contact the creditor right away.

Checking Your Credit Score

Since you need a good credit report for a good credit score, once you’ve verified your credit history is in-check you may also want to get your credit score. Knowing what is on your credit report is nice, but without having an estimated score it’s really hard to know where you fall on the scale of good and bad credit.

A FICO credit score ranges from 300 to 850, where the higher the number, the better. And the higher the score, the more likely you will be approved for a loan and ensured the lowest rates. When you know your score you’ll have a pretty good idea of where you fit in the spectrum. For example, scores greater than 720 are considered excellent, and would put you in the best position to obtain the best rates and terms. On the other hand, scores less than 620 are considered poor, and that means you may have trouble getting a loan or may have to pay a few percentage points higher interest. Everything in-between is pretty much average and lending requirements will reflect that. Not sure what your score is? Get your credit score today.

Today, the President reveals some changes to existing student loan provisions that were put forth in recent years. The aim is to ease the burden that many recent graduates face: substantial student loan debt, high monthly payments, and little income.

Obviously, student loan debt is a major problem in this country and it is exacerbated by the weak economy and struggling job market. So any changes that could help these borrowers out has to be a good idea, right? Yes, there are plenty of people this will help, but there are potentially many more who will not be helped.

The original student loan changes proposed a while back had initially put a “pay as you go” cap on payments at 15 percent of your income. In addition, there was a period of 25 years before the remaining debt could be forgiven. These plans were set to begin in 2014.

The changes are essentially as follows:

• New payment capped at 10 percent of income.
• New forgiveness period is 20 years.
• Rules take effect on payments starting in 2012 (two years sooner).

The new proposal also mentions being able to consolidate federal student loans, but I’m not sure how that differs from the old plan because you could consolidate loans starting in 2012 with that as well.

It’s Good News for Some

Anything that can help ease the pain new graduates face with student loan debt is welcome, but will it really make a difference? Let’s break it down and see what the real world implications are.

The most significant aspect of this plan is the two year head start. Under the old rules, those looking to take advantage of most of the proposed changes would have to wait until 2014, which in terms of a financially struggling graduate, is an eternity. So the fact that these new rules go into effect in a matter of months instead of years will help a lot, especially during these difficult financial times.

In addition, the new cap on payments tied to income and shaving five years off of the forgiveness period is nice, but keep in mind that artificially lowering payments and dragging them out just means you’re also paying far more in interest.

Calculating What Your New Payments Might Be Under the Plan

Let’s start with the “pay as you go” payment cap. This plan caps your payment based on your discretionary income, which is defined as your AGI minus the poverty level for your state of residence and family size, divided by 12.

So for example, let’s say you just graduated college, have $50,000 in federal loans, and you found an entry-level job paying just $30,000 a year AGI. Under a standard 10-year plan your payment would be about $492 per month. Your discretionary income would be $19,110 ($30,000 – $10,890 1-person poverty level). Divided by 12, that’s $1,593. This means that under the old plan of a 15 percent cap, you would pay no more than $239 per month on your student loan debt. Under the new plan your maximum payment would be around $160. A difference of $79 each month.

The new plan will clearly save money over the old plan, and compared to the original payment there is a savings of a few hundred dollars each month. But don’t let that fool you. This is huge benefit for a single person with low to modest income, but what about couples or families where there may be dual incomes?

Take a family of two where the person in the example above has the same loan and same job, but instead also has a spouse earning $40,000 a year AGI. Now, the discretionary income available is $55,290 ($70,000 �’ 2-person poverty level of $14,710). Under the old plan you wouldn’t have even qualified to take part in the pay as you go plan because 15 percent of your discretionary income is $691, which is higher than the original 10-year monthly payment amount. The good news is that under the new 10 percent cap you would be able to take part, and your payment would be set to $461 a month. A savings of $31 each month.

You can see how drastic these two situations are. A single person with a modest job and modest loan gets significant help. That same person who is married to someone else that also has a modest income means virtually no benefit at all. Clearly, these new rules will help a lot of people, but like the proposed mortgage changes meant to ease the mortgage payment pain, there are going to be even more people out there who could use the help but simply won’t qualify.

This is not a simple black and white calculation, because there are countless factors in play here. The amount of student loan debt you have, the interest rate you’re paying, your family size and any additional income, and where you stand in the repayment of your loan will all play a huge role as to whether or not this new cap will reduce your payments. The larger the loan and higher the interest, the more help you’ll receive. But the more money you make, or couples with additional income may still find themselves with tens of thousands in student loan debt and still can’t catch a break even with this plan. So you’ll want to run the numbers on your own situation to get an idea as to whether or not you would be eligible.

Finally, let’s not forget that this is for federal loans only. Private loans do not qualify. This is not going to help the many millions of borrowers who have taken out some, or all of their loans out through private institutions.

Problems Going Forward

As with most financial regulations and changes dished out by the government, they are more or less a band-aid and don’t aim to address the fundamental problem at hand. This is no different. Will this plan ease the pain for many borrowers? Absolutely, but it will still leave many struggling families left out in the cold. Furthermore, this does absolutely nothing to address the real problems.

Tuition prices are still a runaway train and increase year after year while the value of that education continues to become diluted. As long as universities are allowed raise tuition without regard to the value a degree provides and the government is willing to let students borrow as much as they want, this problem won’t go away. In fact, it will only get worse.

But in the meantime, if you’re one of the few who can take advantage of the government’s new student loan reduction plan, you can be thankful there. For the others, and for our children who will be attending college in the future, let’s hope some serious changes are on the way.

What Are the Chances the Borrower Will Default and Leave Me Holding the Bag?

According to the FTC, most lenders revealed that of all the co-signed loans that go to default, as many as three out of four co-signers are required to repay the loan. Now those aren’t good odds if you’re the co-signer.

Remember, your friend or relative has asked you to co-sign because he or she has been turned down for credit by a lender and can’t borrow the money on their own. If they raise a red flag with lenders, it should at least raise your suspicious as well. Granted, sometimes this is due to a lack of credit history rather than bad credit, but the reality is that a lender, who is in the business of lending money, felt that the borrower is too much of a risk. This should give you pause for thought.

What Will Happen If the Borrower I Co-signed for Misses a Payment?

In most states, if the borrower misses a payment, the lender can come after you first, without trying to collect from the borrower.

• You could be required to pay late fees or attorney fees.
• You could have your wages garnished.
• You could lose any property you pledged against the loan.
• You could be sued.

What Should I Consider Before Co-signing a Loan?

Before you co-sign for a loan, be sure you can afford to pay the debt if the borrower defaults on the loan. You may feel confident that this won’t happen, but consider the unexpected: people lose their jobs, become ill or disabled, or die unexpectedly. Others are just irresponsible. When you co-sign a loan, be sure you are capable of repaying the loan, and that it wouldn’t cause a financial hardship or jeopardize your own credit. But if you’re in a situation where having to pay this loan yourself would put you into a financial hardship, resist the urge to co-sign even if it means helping a close friend or family member.

Will the Co-signed Loan Affect My Credit Score?

Yes, it will. The loan you co-sign will show up as a liability on your credit record, which may prevent you from obtaining credit yourself. If you’re planning to buy a house, car, or other large purchase during the life of the co-signed loan, you may want to think twice. Keep in mind this is different than being an authorized signer on an account. Those typically don’t show up on your credit score, but when you co-sign, you’re pledging your credit.

Is It Ever a Good Idea to Co-sign a Loan?

Despite the risks, there are times when it makes sense to co-sign a loan. For instance, many parents do it for their kids to help them establish credit. This is especially true that these days with new credit card rules in effect it’s harder for young adults to obtain credit. Obviously, parents co-signing for children is a bit different than if you were to simply co-sign for a friend who is in a financial bind.

Is There Anything I Can Do to Protect Myself If I Do Co-sign a Loan?

If you do decide to co-sign a loan, try to get the lender to agree in writing that in the event of a default, you would be responsible for only the principal balance of the loan. This would protect you against legal fees if the lender decided to sue.

Also ask the lender to agree in writing to notify you if the borrower is late with a payment. This could give you valuable time to try to rectify the situation before it gets out of hand. And make sure you get copies of all the paperwork for the loan. If the lender won’t give them to you, get them from the borrower. Finally, before you make the decision to co-sign a loan, you should know the purpose of the loan, type of loan, and terms of the loan. Make sure you read all of the fine print as if you were getting the loan yourself.

But nothing could be further from the truth. In fact, wiping your hands of credit and becoming a cash-only citizen is the single worst thing you can do after a bankruptcy.

On the surface, it seems to make sense: Since credit is what got you in trouble in the first place, giving it up seems wise. But if you really want to find the best way to begin repairing credit after bankruptcy, you actually have to use credit.

Of course, you shouldn’t go out and start buying things willy-nilly. You must follow a strategic three-part plan.

The first rule of repairing credit after bankruptcy is this:

Rule #1: Open Three New Credit Cards

When I tell people about Rule #1, the first thing they say is, “But I can’t get credit.”

That’s not true. In a minute, I’m going to show you how to get credit cards so you can begin repairing credit after bankruptcy. But first, I want to tell you why this rule is so important.

The three credit-scoring bureaus�’Experian, Equifax, and TransUnion�’use a formula to determine your credit score. The formula places more weight on current behavior than it does on past behavior. This makes sense�’the formula assumes that a person’s current behavior is a better indicator of their future behavior.

If you have a bankruptcy, and then don’t do anything, you aren’t giving the credit bureaus any new information upon which to judge you. So your score won’t budge.

But if you open new lines of credit and start paying them responsibly, you are giving the credit  bureaus new information about yourself. You are telling them that the bankruptcy gave you an opportunity to wipe the slate clean and start practicing responsible financial habits.

Here’s your game plan to begin repairing credit after bankruptcy.

1. Open three new revolving credit cards.
2. Open them all at once. The credit-scoring formula assigns higher credit scores to people who have older accounts. When you open a new account, it lowers the average age of your accounts. So although opening three new revolving credit cards at once will initially hurt your score, you will be better off in the long run.
3. Look for “secured credit cars.” Like I said, a lot of people think they cannot get credit. It is true that you will have a hard time getting a traditional credit card. That’s okay. Instead, apply for a secured credit card.
4. Avoid retail store credit cards. Retail credit cards are sometimes easier to open than the major credit cards, but nonetheless, you should only open Visa, MasterCard, American Express, or Discover cards. The ideal number of credit cards is three to give. Why waste a spot on a card than can be used only at one store?

Rule #2: Continue Repairing Credit After Bankruptcy by Opening an Installment Loan

Another way to show the credit bureaus that you have changed your patterns of behavior is to open an installment loan. You won’t have much luck qualifying for a $15,000 installment loan, plus you will have high interest loans, so you should take out a small installment loan instead. Aim for a $1,000 installment loan, which you can use to buy a new piece of furniture, computer, or something else that you can be purchased on installment. To avoid paying a ton of interest, pay the balance within six months.

Rule #3: Make Your Payments on Time, Every Time

If you have declared bankruptcy, you have a big, fat warning sign next to your name. The bureaus are going to pounce on you if you make even a tiny mistake.

Remember that you must never give the bureaus any indication whatsoever that you are back to your bad habits. Keep the balance on your credit cards as low as possible�’ideally, 10 percent of the limit. And pay those bills on time!

Philip Tirone is the founder of the 14-Day Credit Challenge, which helps people begin repairing credit after bankruptcy, foreclosure, or other financial meltdown. To learn more, sign up for his free webinar .

Pay Down Your Current Debts

If you have large balances on your credit cards, you will need to develop a plan of action to reduce the amount you owe. This will go a long way in your effort to elevate your credit score. A good practice is to keep your revolving balance at about 3-7% of your overall credit limit. The more available credit you use, the lower your score will be. Not sure what your credit score is? Get it today for free with GoFreeCredit.com.

Pay Everything on Time

You should avoid late payments, even the small ones, at all costs. Even small charges like library fines and telephone fees. Even these little fees can make their way into a credit reporting agency or into the hands of a debt collection agent. If they do it can impact your credit report and set you back. This also applies to payments that are not regularly listed on your credit report. If you fall behind on your payments, they could still end up there.

Create New Credit Habits

A lot of bad credit is created by poor spending habits and irresponsible credit card use. If you do not change these habits, then you will never pull yourself out of the low credit zones. Always make sure you stay well below your credit limit and pay your bill on time. If you can pay the full bill, then by all means you should do so. A maxed out credit card is the least ideal situation for your credit score.

Get New Credit

If you find yourself unable to use a reputable credit card because of your bad credit rating, try applying for credit cards with lower application standards. If you use them responsibly you can still establish a positive payment history. Look into department store or gas credit cards. There are even special credit cards for people with bad credit as well as secured credit cards. Be careful to avoid those bad credit cards with high fees and interest rates as well as prepaid credit cards. Try not to submit too many applications, as this can affect your credit score and make it harder to get approved for new credit.

Replace Bad Credit with Good Credit

As you put your good credit habits into motion, you will show creditors that you have the ability to build a solid credit history. Continue to practice good techniques and charge only what you can afford. Use your credit cards as tools for a better credit rating. One or two cards is more than enough to get you started on the right path.

So, you see, it’s not the end of the world is your credit is bad.  You can always take steps toward improving things.  And your credit score is no exception. Just be sure to maintain realistic expectations and understand it won’t happen overnight.

Have you tried to get a handle on your debt yourself but still can’t seem to make any headway? First of all, it’s OK and there’s nothing to be ashamed about. If you find that you just can’t get back on track yourself, there are people out there who can help. At the same time, you must be careful when selecting your help because there are those who prey on people in debt and seeking help. Some programs may end up costing you a lot of money to simply do what you’ve already been doing, and others are downright scams targeted at taking advantage of you.

To help you understand what type of help is out there, we’re going to talk about the different assistance programs typically offered, what kind of services they provide, and what you can expect from them. There are four basic types of resources to help you get a handle on your debt:

1. Debt Settlement Companies

Debt settlement companies negotiate with lenders to accept only a portion of the amount owed and forgive the remaining debt. They often charge a considerable fee and claim to be able to obtain an immediate reduction in monthly payments. The reality of debt settlement is that the consumer is told to stop paying bills and make payments for a few months while they negotiate with the creditors. The debt settlement company then tries to negotiate a payoff amount with each creditor and uses the threat that you’re heading into bankruptcy as a negotiating tool. This often appears legitimate since you’ve been missing more payments, so it can help reach a settlement with the creditors for an amount much lower than what you owe. Then you use the money that you hopefully saved over the past few months to pay off the negotiated payoff amount.

For example, let’s say you owe $10,000. Instead of making your regular monthly payments on this debt, you stop and put that money aside and find you’re able to save up $2,500 over the course of four months. The debt settlement company charges you a $500 fee to negotiate this debt on your behalf and is able to get the creditors to agree to settling the debt for $2,500. That’s great, right? You were able to get out of paying most of your debt! Not so fast. Remember how you were told to stop making payments on the debt? Those negative marks usually aren’t going away and have now caused significant damage to your credit history and will be there for seven years. And the fact that you settled the debt doesn’t make it appear as if you paid off your debt. That alone will show up on your credit report as “settled” and is also a significant negative mark on your history that will be with you for years. Unless your credit score is already at rock bottom, you’re already months behind on your payments, and you’re staring bankruptcy in the face, this is usually not a good option.

2. Bankruptcy

That brings us to the next ugly alternative — bankruptcy. Under bankruptcy, all or a portion of your debt can be absolved by the courts. Bankruptcy is typically held as the last resort since a bankruptcy will stay on your credit history for ten years and make it quite difficult to obtain lending for a while. In addition, the legal fees associated with filing bankruptcy can be fairly steep. You’ll often hear stories about people who are too broke to even afford to file bankruptcy because the attorney fees alone can run into the thousands of dollars.

Things can get complicated depending on whether you have secured or unsecured debt, own property, have equity, and what type of investment accounts you have, and what chapter bankruptcy you file. The potential complications and legal issues surrounding bankruptcy go far beyond this article, so it’s certainly worth your while to consult legal assistance if you feel that bankruptcy is your only option.

3. Debt Consolidation

So, we’ve talked about two of the least attractive options, but now it’s time to focus on the two potentially better options. First, you may be considering debt consolidation. Here, you’re not negotiating out of any debts, settling for a smaller amount, or absolving yourself of any debts through legal proceedings. Instead, you’re simply consolidating all of your debts into one or two more manageable payments.

We’re not magically fixing any debt problems, but just making it easier to make payments and hopefully reduce the amount of interest paid. For example, if you have six outstanding credit cards with interest rates from 20-30%, consolidating these into a single loan or credit card that has a 12% interest rate can not only reduce the number of payments each month, but it could potentially save thousands in interest.

A few words of caution. Be careful when seeking out a debt consolidation company. Some will advertise debt consolidation only to pressure you into some sort of debt settlement program after meeting with you. Others will offer a consolidation loan that doesn’t have a very good interest rate and may be lined with fees that make it so you aren’t actually saving any money. And finally, the biggest problem when consolidating debt is that people don’t change their behaviors and end up right back where they started and in even more debt a few years later. Remember, debt consolidation doesn’t pay off your debt, it simply shuffles it around. If you consolidate your debt and now have all of this available credit on your credit cards, you have to make sure you don’t start using that credit or you’ll find that you’re going to be in even more trouble.

4. Credit Counseling Services

This brings us to credit counseling services. There are two different ways that a credit counseling service can help you if you are burdened with debt. First, a good credit counseling service works closely with you to help provide financial education and tools that can help you get your finances under control. They may work with you to create a budget and assist in helping with the emotional baggage that comes with excess debt.

The second method of assistance is through a debt management program, or DMP. Through a DMP, the credit counseling organization works with you and with your lenders to find a way to manage the debt and pay it off. Unlike a typical debt settlement, a DMP will usually focus on working with the creditors to reduce interest rates, waive late fees, and establish a more affordable monthly payment before trying to negotiate the amount of the debt entirely. Because of this, being on a DMP generally won’t hurt your credit score. Even so, there may be a note on your credit history indicating that you used a DMP to assist in paying off the debt, and future lenders could use this to decide whether or not to extend credit to you. At any rate, this is still better than having months of late payments and a debt being shown as settled on your credit history. After all, in the end it’s all about lowering your overall debt and utilized credit ratio that will ultimately help you improve your credit.

The problem is that not all credit counseling services are created equal. First, there are two primary types: for-profit and non-profit debt counseling services. For-profit services are almost always a bad idea, and in some states for-profit credit counseling companies are illegal. So, your first step should be to determine whether or not you’re looking into a non-profit agency or not. Unfortunately, just finding a non-profit counseling agency is not enough. Every organization is different and there will be different fees and services associated with each. In some cases you may be able to have the fees waived, but you certainly want to make sure you understand what you’re getting for your money if it does cost anything. Be wary of any company that promises a lot but charges a high monthly fee.

More about Debt Management Plans

As I mentioned above, many credit counseling services will offer a debt management plan (DMP) to help you in getting out of debt. One thing you need to understand is that these plans aren’t typically like debt settlement companies and won’t cancel out existing debt, nor is it a consolidation loan. It’s actually a plan put together that helps the creditors get their money while allowing you to make payments on time.You’ll also want to note that most DMPs will only address unsecured credit, so if your primary concern is a home or auto loan, there won’t be much a credit counselor can do other than help you budget those payments.

With a DMP your credit counselor will work directly with each of your lenders to see if they accept a DMP and if they can work with you to make sure that you stay current on your payments and possibly even reduce the interest rate. In some cases a credit card company will temporarily reduce the interest rate while on a DMP. I’ve seen people get their rates reduced all the way down to about 6% in the past.

The other benefit of a DMP is that it can often simplify your monthly payments. Most credit counseling services will take over sending monthly payments to each individual lender so you’re left with only making one single payment to the credit counseling agency. They usually schedule these for monthly or bi-weekly through automatic debit with your bank account so it can ensure you don’t miss a payment. As you probably know, it’s a lot easier to make and keep track of one or two fixed payments a month rather than a bunch.

A Few Final Thoughts

As you can see, there are options out there to help you manage your debt problems if you find you can’t handle it yourself. Aside from bankruptcy, you can accomplish most of the tasks that these services provide on your own for little or no extra cost. Understandably, not everyone has the time or resources available to follow through with their plans and this is when seeking assistance from a third-party can be beneficial.

While you explore your options, be sure to look at all the alternatives and make sure you’re dealing with a reputable company. There are people out there who realize the amount of stress someone with debt problems is under and they will sometimes try to take advantage of this situation. If anyone is promising seemingly incredible results, know that there is no magic bullet for getting out of debt. Each avenue has its own pros and cons, and some may have a lingering impact on your credit history that will be with you for years, so don’t take the decision lightly.