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Credit cards, loans and other types of credit are convenient to use, make managing your money easier, and can be especially useful during emergencies. Credit makes it easier to pay for large expenses such as cars and home improvements, and a mortgage can put you in a home without needing cash for the entire purchase price.

Credit is a powerful tool
But credit is also a big responsibility. When you use credit improperly, it can lead to unmanageable debt and financial crisis. The more you know about credit, how to manage it and the warning signs when you may need help with managing credit, the easier it is to use this powerful tool wisely.

Types of Credit
You can obtain a loan for a specific purpose, such as financing a new car, paying college tuition and buying or renovating a home. You can get a debt consolidation loan, which combines all current debts from various creditors into a single reduced-interest payment plan. And you can get a credit line linked to your checking account that gives you bounce-proof protection if you write a check for more than what you have in your checking account.

Loans are generally divided into two types: secured and unsecured. A secured loan is a loan which is guaranteed by collateral of some kind. Collateral is an item of equal or greater value than the amount of the loan, such as a car, a home or a cash deposit. An unsecured loan is not guaranteed by anything.

Credit cards are perhaps the most common type of personal credit. Using a credit card is like getting a loan. Every time you charge something, you're borrowing the money until you pay it back. If you decide to pay the money back over time, the credit card company adds finance charges to your account that you must pay along with the purchase amount.



Develop good habits before problems startEven the most careful spenders can find themselves with too much debt. Often, financial crises result from circumstances beyond your control. Maybe you or someone in your family lost a job or became seriously ill. Sometimes people find themselves in over their heads financially simply because of unrealistic spending habits.

Whatever the reason, there are presently 5 to 7 million Americans who are financially overextended.BudgetingThe best way to deal with credit problems is to develop good habits before problems start. As a first step, you need to organize your finances and keep a budget.

Even if credit difficulties are already a reality, a budget is a powerful tool for helping you get out of debt and maintaining good credit afterwards.A budget helps you organize your spending. It tells you what money comes in, what money goes out and where the money goes. Creating a budget can also show you where some changes might be needed. It will help identify expenses that aren't as important to you so you can free up money for those that are.


Credit cards are the form of credit most people will apply for and use during their lifetime. It's also the form of credit that people often have the most trouble managing.Information is the key to managing your credit cards wellIf you're like most people, you probably haven't read the "fine print" of your credit agreement carefully or at all. Even so, you can still get smart about your credit cards. Once you understand how they work, you'll be ready to take control.

Card ownershipWhen you apply for a credit card, you choose the kind of credit you want:
Individual credit is based on your assets, income and credit history only. You alone are responsible for paying the bills.

Joint credit is based on the assets, income and credit history of both people who apply. Married couples often apply for joint credit. You may obtain more credit this way, but you'll both be responsible for the debt - even if you get divorced.

An authorized user is an additional person to whom you give permission to use your account. However, you (and your joint account holder, if any) are solely responsible.