It does not matter what brought you to this point. You are there. The bankruptcy is over, usually Chapter 7 – a total wipeout of the debts – and you believe you are now the highest credit risk on the planet. Lots of things may be going through your mind at this point, from feeling like a failure for letting your creditors down, to finally feeling free because you are no longer afraid every time your phone rings that it is someone who wants to take yet something else away from you.

Now is the time to be careful. In the coming weeks and months, you will be inundated with every credit offer known to man. The invitations will bog down your mailbox asking you to apply for this credit card or guaranteeing you acceptance for that credit card (for a low annual fee, and possibly a secured amount of funds in the bank) and then the car dealerships will get to you.

You are wondering why in the heck this is happening. However, more than wondering why, you just may be tempted to immediately start rebuilding your credit by applying for all those wonderful lines of credit that are suddenly open to you.

The old saying “buyer beware” should seriously go into play about now. Read the fine print on every offer. The interest rates are going to be astronomical. Repayment terms will be stiff. Penalties for late payments are going to ask for everything shy of your first-born.

Why is this happening? Well, because since you just cleared a bankruptcy, you have no debt. Your debt to income ratio is zero debt to 100 percent income. You cannot file bankruptcy or ask for court intervention if you get yourself into trouble again for close to a full decade from now. You are no longer a risk. The banks, credit card companies and automobile dealerships have recourse they did not have a few short months ago. Now if you default, it will be far easier for them to attach your wages, bank accounts or any assets you may have held onto during the bankruptcy.

You must be very smart about how you are going to go about rebuilding your credit. Do it slowly. There are a couple of very good credit card companies that will help you rebuild your credit at a slow pace and with minimum of risk for them. Usually that means you will pay a fee for their services and frequently they will start you off with a secured credit card. A secured credit card is one where you put a specific amount of money into a checking or savings account, reserved for this amount of money only (say $200.00 to $400.00). If for whatever reason, you do not make your payment, the company will take the money from the account immediately to pay the full balance due and close your credit card account.

What would be a more prudent course of action, is to give yourself a few months for the offers to stop or at least slow down a bit. Make sure that for a given time, the only bills that you have are your rent (or mortgage), your car (if you still have it), and your utilities. Most cell phone providers report to a credit agency, therefore if you do not have a cell phone, that is a good place to start building credit. Within a year, open three minor, preferably secured lines of credit and do not allow any of them to come close to reaching the full balance. Purchase something minor on the card, pay it off at the end of the month and make sure there is no balance to carry over for the credit card company to charge an interest rate on.

Take time to build your credit slowly – I cannot stress that enough. It took a long time to reach the point of bankruptcy. It will take a while to get the credit cleaned back up. It can be done. Just do not be in such a hurry that you do it the wrong way or unwittingly get yourself in over your head.

Daily advertisements tell the consumer to go to one place or another to obtain free credit scores. Unfortunately, once you are lured onto the site, you will normally discover that indeed you may obtain a free credit report, but the score itself costs a fee. This fee may require a one-time payment or a monthly fee to keep you up to date if there are any changes in your credit.

Regardless of the advertisement or which method you choose for obtaining a copy of your credit report and ultimately the score, it does you no good if you do not know how to read it or what it all means.

Most people do not know what all those mysterious codes next to each entry means or how the information posted weighs into the final calculation to reach that magical number known as your credit score.

Each institution uses a different scale to weigh each item. If you are looking to purchase an automobile for example, the car dealership is going to put more weight on your former automobile loans, vehicle insurance, and outstanding utility bills (if there are any). Their focus will be on items such as previous addresses and length of employment. Automobiles by design are mobile. Therefore, it is much easier to move about with them and leave a lender stuck holding the loan and attempting to repossess a vehicle than with other types of credit.

Items such as outstanding medical bills, or that short period of time where things got behind, will be much less important than knowing where you (or the vehicle) can be found should payment not be made.

A credit card company looks at each item presented in a totally different manner. They are more concerned with the number of credit cards that you already possess. What the open line of credit on each is, frequency of late payments, and the amount of available credit currently being used.

The “unspoken” calculation which weighs heavily is: if this person should suddenly fall ill or be out of work and used all of his/her available credit, would he/she be able to make more than the minimum payments of each card?

Mortgage lenders use a completely different set of eyes for weighing each item than automobile dealerships or credit card companies do. They scrutinize every item carefully and give it a weight that is unique from what other lenders do. The “not so important” illness or divorce that caused a blip previously ignored by the automobile lender or credit card company might be a major issue when obtaining a home loan.

These lenders look to see if the illness may reoccur or if the divorce left huge debts to pay. Frequency of changing jobs or residences may be explainable as being “upwardly mobile” to one lender, while in the mortgage arena those items are considered major red flags of instability.

As with credit card companies, mortgage lenders are concerned with debt to income ratio and what your final numbers are. Debt to income ratio is a fancy way of comparing your monthly debt to your monthly income. When the debt is higher than a specific percentage, regardless of how great your payment history may be, your risk levels rise.

Of course, this is an oversimplification of the entire credit process. However, one important thing to remember where credit is concerned, the more you have, and the higher the risk you become. Little to no credit or bad credit can literally cripple a person’s future.

It can prevent a person from getting specific jobs, apartments, credit cards, or even insurance. Learn what yours is, how to fix or improve it, and the steps you can take to protect it. Ensure that should you decide one day you want or need more credit – you can obtain it at a rate that you can live with.