However, you don't have to have debt in order to have credit. Debt has become a frequently used word. It is defined as something that is owed; something that one person is bound to pay or perform for another. Credit is defined as trustworthiness. It is the time allowed for payment of goods or services obtained on trust.



When you make a credit payment late, or if the account falls into collection, the action can remain on your credit report for up to 7 years! Bankruptcies can be reported on your credit record for up to 10 years. Therefore, it is important that you prevent credit problems from happening.

Here are some ways to avoid credit disaster:

1. Set credit goals. When you set credit goals for yourself, you will have a better idea of what you are trying to accomplish financially. Credit goals will also help you create a strong financial future. In goal setting, you must establish both long-range goals and short-range goals. Setting short-range goals with credit should include establishing a good payment pattern and increasing your credit score.

A long-range credit goal could be a large purchase, such as a house, a business or specific investments. The more creditworthy you become, the more opportunities you will have to make money.

2. Control your spending. Credit and charge cards can easily get out of control. When you are using your credit card, the balance can accumulate quickly. A good habit to get into when using your credit card is to keep an index card in your wallet to write down every purchase you make. Once you reach the maximum amount you can comfortably pay when your credit card bill arrives, stop spending. By tracking your spending on your credit card, you will not have any surprises when you receive your bill in the mail.

3. Pay off your credit card balances in full each month. It is very tempting to pay just the minimum payment on your credit card statement. Usually the minimum balance of $20.00 looks more attractive than your actual balance. However, if you carry a balance on your credit cards, the balances and interest charges are going to continue to add up. You run a risk of finding yourself in a high amount of debt.

You should also make a plan to pay your home and automobile loans off as soon as possible. This can be accomplished by making extra payments each month.

4. Be on time with your bills. Making late payments will have a negative impact on your credit report. For example, you will have a hard time qualifying for a home loan if you have recent late payments on your mortgage. Late payments also have a serious effect on your credit score. According to Fair Isaac, (http://www.myfico.com), payment history makes up 35% of your credit score.

5. Educate yourself about the world of credit. One of the biggest financial problems society has is lack of education of credit and its uses. Familiarize yourself with your legal rights as a consumer. The Federal Trade Commission offers publications about consumer credit that you can request free of charge. Visit http://www.ftc.gov for more information.

Being responsible, trustworthy, debt free, and self-controlled in handling your finances will make your life much easier.