Good credit is a big deal, and having bad credit can be a real problem. Know the facts about your credit before you make major purchases or apply for new credit.

Establishing Credit

People who are just starting out might find it hard to get a loan or a credit card. That's because having no credit history makes it difficult for lenders to know if you're a good risk to repay a loan and make your payments on time.

Establishing a good credit history is not as difficult as it seems. In all cases, however, you'll need to make payments on time. Some tips include:

• Apply for a credit card through a local store. Local stores are more likely to extend credit to people without an established credit history.
• Apply for a secured credit card. By borrowing against your own money, creditors find this to be far less risky.
• Ask someone with a good credit history to co-sign on a loan or a credit card application. By co-signing, the person is agreeing to pay back the loan if you don't.

Maintaining Credit

Knowing what creditors evaluate is important. Some of the things they look at include:

• Your credit/loan application
• Your credit report
• Your bill-paying history
• How many accounts you have and what kind
• Whether or not you make payments on time
• How long you've had your loans/accounts
• Unused portions of lines of credit
• Collections actions
• Outstanding debt

Improving Credit

If you've charged too much on credit cards or are paying less toward your debts than you should, you're not alone. A lot of people are in this situation. Some ways to turn things around include:

Budgeting

In many cases people design and stick to a budget to get their debt under control. A budget is a plan for how much money you have and how much money you spend. Sticking to a realistic budget allows you to pay off your debts and save for the proverbial rainy day.

Credit counseling

Many universities, military bases, credit unions and housing authorities operate nonprofit financial counseling programs. Some charge a fee for their services. Creditors may be willing to accept reduced payments if you are working with a reputable program to create a debt repayment plan.

Bankruptcy

Bankruptcy is considered the credit solution of last resort. Unlike negative credit information that stays on a credit report for seven years, bankruptcies stay on a credit report for 10 years. Bankruptcy can make it difficult to rent an apartment, buy a house or condo, get some types of insurance, get additional credit, and sometimes, get a job. In some cases, bankruptcy may not be an easily available option.

You could also contact your creditors. Let them know that you're having trouble. Some might be willing to work with you.

Protecting Credit

Credit cards make buying things easier than ever before, but it's important to keep track of your spending. Each time you buy something with a credit card it's like taking out a loan. Incidental and impulse purchases add up, and when the bill comes, you have to pay what you owe.

Another reason why it's important to keep track of your spending is in case there are inaccuracies on your statement. If you notice a problem, promptly report it to the credit card company. Records to keep when you're buying online or through a catalog include printouts or copies of each transaction or form, confirmation codes, a copy of the catalog you're using (if applicable), and the warranty, return and refund policies.

If you have a credit card, here are some other tips to protect your account:

• Never lend your credit card to anyone.
• Never sign a blank charge slip.
• Never put your account number on the outside of an envelope or on a postcard.
• Always be cautious about disclosing account numbers on the telephone.
• Carry only the cards you need.
• Keep a record of your account number, the account's expiration dates, and the phone number and address of each credit card company in a secure place.
• Report lost or stolen ATM and credit cards to the card issuers as soon as possible. Follow up with a letter.

Lost or Stolen Wallet or Purse?

A lost or stolen wallet or purse is a gold mine of information to identity thieves.

If your wallet or purse is missing:

• File a report with the police immediately and keep a copy.
• Cancel your credit, debit and ATM cards immediately.
• Get new cards with new account numbers.
• Call the fraud departments of the major credit reporting agencies.
• Ask each agency to put out a fraud alert on your accounts.
• Report the loss to the fraud department at your bank.
• Review your credit reports regularly and have them corrected when necessary.
• Report a missing driver's license to your state's department of motor vehicles.
• If your keys are missing change the locks on your home and car.

Credit Scams

Advance-fee loan scams involve guaranteeing a credit card in advance for a fee before you even apply. These offers are illegal and often target people with credit problems. If someone calls you at home making this offer, tell the person not to call anymore and hang up.

Another thing to watch out for is deceptive ads promising debt relief, when in fact they are offering bankruptcy. Bankruptcy stays on your credit record for 10 years and hinders your ability to get credit. Before agreeing to any debt-relief services it's important to get all the details.