Establishing and Maintaining Credit

Lenders use your FICO® score to evaluate how you handle credit much as your parents look at your report card to see how you've done in school. They aren't necessarily interested in everything you've done in the past, they just want a quick summary of the highlights. Since your FICO® score is based on data about how timely you pay your bills and how much credit you have reported from your creditors to the big three credit agencies, it's extremely important that you make sure that you handle credit well and ensure that the data in your credit report is accurate.

As we saw, a low credit score can have a negative impact on your employment, how much you pay in interest, and whether you'll be able to get credit, among other things. If you have good credit history, protect it. If you have a less than perfect credit history, work to make it better.

Although it might seem tempting to think that you can avoid these problems by having no credit, it takes a long time to establish a good credit history, and just because you don't have a credit history, it doesn't mean you're not a risk. Your creditor might think, why should I be the first business to find out he's a bad risk!

There are several laws that protect you as a consumer when you use credit, however, only you can protect yourself from becoming overwhelmed by debt. By making wise choices and spending carefully, you are on the road to being a wise consumer! In the next topic, you will learn about managing debt. How do you know how much is too much? What can you do to get out of debt? Where can you get help with debt management? All of these things will be discussed in the next topic.