It’s better to never get in that situation! There are many traps that are easy to fall into, though with some knowledge, easy to avoid.

Protection #1:    Don’t apply unless you are sure. Every time you apply for any credit, there will be a credit report inquiry. Those inquiries will show as a mark on your credit report for a year. Too many credit checks will lead to a reduced credit rating until they expire and show no more.

Protection #2:    Whenever thinking of any payment you might have, look at your income and how much of it you have left each paycheck. How much did you have left last year? How much will be free next year?

It’s important to not get buried in payments that you might not be able to pay.

If you decide against the potential payment, don’t even apply, to avoid the inquiry on your report.

Protection #3:    Never miss or be late on a payment. There will almost always be a mark on your credit report, and probably a hefty late fee as well.

Protection #4:    Avoid having ½ or more of your credit limit on a credit card used. This will lower your credit rating, and beyond that, you will also have less credit in the event if an emergency arises.

Protection #5:    Don’t apply without getting a list of all available credit sources for a particular purchase, and then only the ones you would want. Learn about the terms and be sure they are good in your opinion. Be sure you are willing to stick to them as well.

Protection #6:    Don’t get things on credit that won’t last as long as you are paying on them. It’s hard to pay twice for the same item, and a waste

Specific types of credit, and what to look out for:

Car Loans:    These can be a potential burial spot if you get a car that then breaks down long before it’s paid off. Trading in early before most of the loan is paid off can get you deep into dept with a large payment over a long term. Look carefully when choosing a source for a loan, and pay attention to every detail.

Mortgages:    These can be a great way to cut your annual expenses for a home (eventually). There are many choices in this area. And often, you can get extra to payoff other loans if you are getting a real good deal on the home. But consider something… Will the house outlast the loan? Or if you want to move on and up, will you be able to sell it for enough or more even to pay off the loan?

Credit Cards and Revolving Credit:    These can be real useful, or bury you in a hurry. Most of the time anymore, the interest rates on these are higher than ever, and there are very few anymore that don’t include an annual fee (often around $60.00). In the terms they can raise the rate at any time, if your credit rating goes down (even if you pay perfectly with that company). They also have the most expensive fees. Often a payment even one day late will be a fee of $30 or more. The same applies if you go over the limit. It’s easy to go over limit with a very small balance if you are late a few months in a row. And the interest rate will go up.

Student Loans:    The best suggestion is first make sure you are getting all the grants you can and avoid loans until you can’t. From there, shop around and consider all choices before agreeing to any.

Other things to help build credit:    For starters, the length of time on your job, and at your current address will take you a long way. The more you change jobs, and the more often you move, the lower your credit rating in general.

Any late amount (above $50) can show up on your credit report, as soon as it is 30 days overdue. Over limit will also show there. This includes your telephone, and other bills. In some cases, even your rent.

Anymore, bad credit can make it harder to rent new places, get better jobs, or even cheaper car insurance. All the above might consider your credit these days. The best policy is, if you don’t know, don’t do it.

To read more articles by Tony Robinson, check out http://better-adsense-info.com.