our financial security depends on a good credit history. If you don't have credit yet, establish a financial presence and be responsible with your money. The first step is opening a bank account.

Shop around for a free or low-cost account. Make sure you understand the bank's charges and fees. If you can afford it, also open a savings account.

Safeguard your automated teller machine (ATM) card and your personal identification number (PIN). No one else should know your PIN or have access to your ATM card.

1. Make Regular Deposits. Don't let your balance go below the minimum. Contact your bank immediately if there are any account-related problems or if you see a mistake on your bank statement.
2. Record All Transactions. Record every check, deposit and withdrawal in your checkbook register. Compare the register to your bank statement.
3. Don't Bounce Checks. Don't write a check unless the money is in your account. If you abuse your privileges at one bank, you could be denied access to other banks.
4. Apply for a Credit Card. Ask your bank about opening a credit account. Carefully review the credit terms. Beware of "low introductory rates" because they're only low for a short time. Make sure the bank will report your performance to a credit bureau so you can begin to build a credit history.
5. Pay Your Bills on Time. Don't charge more than you can afford. Try to pay off the balance every month. If you must use more than one credit card, keep both cards well below their limits.

Credit Reports and Credit Bureaus

By far, your credit reports are the main form of your electronic identification. As mentioned in the Introduction: Your credit reports have become as important and needed as traveling with your driver's license.

Credit reports are used for granting credit, calculating interest rates and payments, determining insurance eligibility and rates, checking apartment rental qualifications, etc. There are 3 main credit bureaus: Equifax, Experian and Trans Union. Because each credit bureau reports the credit data differently, you should request copies of your credit report from all 3 companies. Credit bureaus collect and store credit data. That data is sold to prospective creditors in the form of a credit report. Credit bureaus do not deny or extend credit.

Your credit report may contain much of the following:

• Names and account information for all of your past and current creditors;
• Payment history;
• Those who have looked at your credit report, such as your prospective employer;
• Employer's name, employment history and current income;
• Homeownership status and previous addresses;
• Public record information (such as foreclosures, bankruptcies and tax liens);
• Referrals of overdue accounts to collection agencies.

As a member of ConsumerDirect, you may have access to your credit report so you can monitor what is being reported and correspond with your creditors if there are any errors. Or, you can request a copy of your own credit report at least once a year from a credit bureau.

A credit report includes a record of debts and how regularly debts are repaid. Your whole credit history shows up on your credit report, including...

• The date each account was opened;
• The credit limit;
• The highest amount you have ever charged or borrowed;
• A history of payments made;
• All late payments (by 30, 60, 90 or 120 days or more);
• Accounts sent to collection agencies.

Check your payment records against your credit report. Look for errors. Notify the creditor and the credit bureau in writing immediately if you find mistakes.

The key to managing credit is acting responsibly. Show how responsible you are by following this advice:

If you have a bank account, a stable job, a regular income and the same address for many years, then creditors see you as stable.

Pay bills before the due date. Call your creditors if you have a financial crisis. Ask for an extension. If you didn't send your payment on time, send it in as soon as possible. Most creditors don't report late payments until after 30 days.

If you have more than 5 credit cards, you appear overextended. Don't "max out" all your credit cards. Pay off or don't use a card or two if you're getting close to the limit.

Every credit inquiry is recorded on your credit report. Several inquiries will lower your credit score and may be a red flag to creditors.

Creditors look for evidence that your monthly payments on non-mortgage debts take no more than 20% of your net monthly income. This is called your debt-to-income ratio.

Most credit reports contain errors. It's your responsibility to correct any problems or errors on your report. Make sure your Social Security number appears on the credit report you ordered.

To figure out your debt-to-income ratio, divide your net monthly income by 5. For example:

If your monthly take-home pay is $3,000, you should spend no more than $600 on debt payments, other than housing. $3,000 ÷ 5 = $600.

You might have heard stories about credit and how credit reports work. Here are some common myths about credit, followed by the facts.

Before you open up a credit account, find out which type your new account will be. There are 3 account types: Installment, Revolving, and Open 30-day. Understand their payment terms.

such as a car loan, the borrower signs a contract. A fixed amount is paid in regular installments for a specific period of time. This amount includes interest.

such as VISA and MasterCard, give the borrower more options:

1. Pay the debt off in full each month, with no interest charged. This is the best way to keep your credit clean.
2. Pay more than the minimum amount, with interest charged. This is a good idea if you can't pay the full balance.
3. Pay a minimum amount chosen by the creditor, with interest charged. Try to avoid this option. You'll end up paying a lot more in interest over time.

require the consumer to pay the full balance due every month, with no interest charged. Instead of paying interest charges, you pay an annual fee. American Express is the most common example of an open 30-day account. Some local businesses also offer this type of account.

The law protects you against discrimination and deceptive and unfair business practices by creditors. If you are denied credit, the Equal Credit Opportunity Act (ECOA) gives you a legal right to know why. Under ECOA, you cannot be denied credit based on your: race, sex, marital status, religion, age, national origin or receipt of public assistance.

The Federal Trade Commission (FTC) enforces a number of credit laws, including laws on debt collection.

Credit may be denied due to:

• A history of late payments
• Lack of credit
• Bankruptcy
• Legal judgments or liens
• Charge-offs
• Credit accounts turned over to collection agencies
• Incorrect information

If you are denied credit:

• Ask the creditor for a written explanation.
• Contact the credit bureau within 60 days. You're entitled to a free copy of your report.
• Don't apply for more credit until the situation is resolved.

If your credit report contains errors, contact the credit bureau in writing. Your claim must be investigated within 30 days. If the dispute can't be resolved or if the information can't be verified, it must be deleted. Creditors and credit bureaus are equally responsible for correcting errors. As an ongoing member of ConsumerDirect, you can directly contact the creditor that reported your incorrect information to the bureau and request it be corrected.

Remember that late payment information can stay on a credit report for 7 years, and bankruptcy information can stay for 10 years.

Establishing and maintaining a good credit history is critical to financial stability in the future.