The American economy is based on credit. If you don't have at least an average credit rating, you will find that getting approved for any type of loan, or credit card, will be very difficult - if not impossible. As nation's economy worsens, money supply becomes tighter. A major factor looming on horizon is growth in national debt. At this moment, country's deficit is approaching a staggering four trillion dollars! That means something like twenty cents out of every dollar spent by Federal Government goes toward paying off interest on money borrowed!

You may be asking what does that have to do with you obtaining credit? Everything! There is only so much money to go around. A common misconception is any government running short of cash can simply crank out more by running printing presses late into night. Wrong! It doesn't work that way. The government, just like a business or individual, has to go out and obtain funds whenever revenues from taxes and sale of treasury notes fall short of expenses. That's easy part. Who wouldn't loan money to Uncle Sam? The hard part is taxpayer has to pay money back! The bigger deficit becomes, more money government borrows. That takes money away from private sector. Of course, that hurts overall economy, and makes less money available for individuals and businesses. It's a vicious cycle that feeds on itself.

This is a short, but important report. lt contains valuable information. Read it carefully, and you will have a better understanding of how applicants are rated, and what you can do to improve your credit rating. The "Credit Scoring System" is a nothing more than a numbers game. Most creditors use something like it to rate applicants Like most games, more "points" you score, better you do. So get out a pencil and paper and we will take a closer look at a typical system:

The first factor you can't do anything about: Your Age. Yes, you could lie, but don't. With all interlocking computer systems in use today, somebody, somewhere, probably has true story. While it's only one element, if a creditor catches you in a lie, even if it's just about your age, they aren't going to trust rest of information you provide either, and you will probably not get loan.

Under 21? Score zero points. 24 to 64 years of age give yourself one point. Over 65? Zero points.

The next question is your marital status. Unmarried, sorry pal most creditor's think you're a higher risk, no points for you What's that? You are married? Give yourself one point. Most creditors don't care if you divorced. If you are, and not remarried give yourself zero points.

Next question: How many dependents: Unlike Uncle Sam who gives you bigger deductions as your family grow in size, creditors think differently. No dependents? Score zero. One to three dependents? Score one point. More than three dependents? Score zero. The thinking is, if you don't have any dependents you have no attachments, you could skip town, not pay off that loan. You have up to three mouths to feed, chances are good you can't pull up stakes and run away. More then three, you could get in debt over your head so you become a poorer risk again, but for a different reason.

Actually, bankruptcy allows you to make a fresh start. Generally, it takes only a small amount of money, a careful evaluation of your assets and your liabilities. In many cases, a lawyer is not necessary.

If you have very few assets, mountains of debt, and not enough income to meet your obligations, then your best bet is almost always filing of straight bankruptcy. What you'll need is proper forms "S3010 Bankruptcy forms, for an Individual Not Engaged In Business." These can be purchased from any full-line office supply store, especially in an area serving attorneys' offices.

You'll need to know which district you live in for Federal Court purposes - so look in white pages of your telephone book under U.S. Government - Courts - and take down address of nearest U.S. District Court. Check it out to be sure that your residence is in this court's jurisdiction.

You then fill out forms you purchased, listing all of your creditors - those with priority being listed first - meaning those who have extended credit to you against some sort of security or collateral, followed by those who have extended credit to you on just your signature or reputation. You must be sure to list all of your creditors because any that you fail to list, will be able to sue you and collect even after bankruptcy has been adjudicated. At same time, be sure to include names of anyone and everyone you may have co-signed a note or a loan for, as well as anyone who may have co-signed for you.

The laws governing personal bankruptcy vary in all states, but generally, a bankruptcy judgement will not take away house you live in, basic home furnishings, a car that's necessary towards your gainful employment, nor tools of your trade. Check these things out to be sure against list of items regarded as necessities of life by your state.

When you've got all forms filled out, and notarized, you take them to Clerk of U.S. District Court in your jurisdiction. You pay clerk $50, and from there, you're home free. The clerk notifies your creditors, and reminds them that being as you've filed bankruptcy papers, they cannot bother you about your debts anymore.

However, they are invited to your hearing. Usually they don't show up, because by that time, you have very few, if any, nonexempt assets left that they are really interested in.

But, whatever assets you do have that are nonexempt, will be sold by Court to appease your creditors. Any money realized from these sales is then added to total amount of money you may have turned over to court at time of your filing, and divided equally amongst your creditors according to priorities.

After all of this has taken place, and usually about 3 months after you've been adjudged bankrupt, you can start all over again to incur debt, pay bills and establish a new credit rating. However , you should be especially careful about talking with your old creditors because they may attempt to maneuver you into signing a "reaffirmation" of your old debt. The thing to do is to be sure that you carefully read anything you affix your signature to, and don't agree to pay on any debt that has already been discharged through your bankruptcy!