Most people can afford to devote 10 percent of their net income to installment debt, not including mortgage or rent payments. If you pay out more than 15 percent, you need to cut back; if more than 20 percent, you are headed for serious financial trouble.

Don't accept more credit than you can afford. Unused credit is counted against you when you apply for a loan or other credit. Keep one or two credit cards preferably with low interest rates. Put them in a safe-deposit box or place where you don't have easy access.

When you do make charges, have an index card, or some sort of record of each purchase you make during the month. As you record each purchase, total the amounts. When you get to the amount that is what you can pay off for the month, stop charging. For example, if you charge $300.00 for the month, make sure you can pay $300.00 when the bill comes due. This will give you a good payment record, plus eliminate finance charges and new debt.

Never charge anything under $25.00 unless you are trying to build new credit and improve your credit report. Make sure that you pay it off at the end of the month. Several small purchases can get out of hand where you lose track at the end of the month and can't pay it off. When credit grantors are determining your creditworthiness, they usually estimate your net income at 80 percent of your gross income (before taxes). Your expenses (mortgage, rent, bills, etc.) should not exceed 70 percent of your net income. Variable expenses such as food, gasoline, utilities, and so on, are estimated to be about 20-25 percent of your net income committed to all your expenses. If you exceed this amount you are probably overextended on your credit.

Credit problems are devastating, so you want to make sure that you do everything possible to avoid them. Not all credit problems are the responsibility of the consumer. Lost mail, computer errors, and delays in posting payments are the most common problems blamed on the creditor. If you don't receive your statement, call the creditor and let them know. You should review your statement every month to make sure your payments are credited properly and that there are no erroneous charges.

Unreported address changes, underpayment of a bill, missed payments and exceeding your credit limit will raise red flags to the creditor as well as tarnish your credit report.

If you find that you are beginning to experience financial difficulties, make sure you contact the creditor immediately. By communicating with the creditor, many times they can assist you in reducing the interest, or deferring a payment if the situation appears to be only temporary.

Knowing the ins and outs of credit will help you build your credit and financial portfolio. It also will help you get a game plan and stay focused to eliminate any future problems.