Just talking about credit automatically appeals to your baser instincts, stirs something in each of us that urges us to protect this abstract notion of trust. After all, credit is just a contract between two parties involving money in exchange for the belief that the trust will be repaid. It becomes an economic reflection of who you are. You feel hunted if your credit is in a shambles, vulnerable and edgy, and not your normal self. But if your credit is good you know what kind of work has gone into getting it that way and keeping it that way. It is no easy task and you feel proud of the effort.

So what does it take to get good credit.

Here are six habits folks with good credit follow:

1. Protect your Social Security Number at all costs.
The better you protect it the greater the likelihood your credit will be safe from thieves, which is one of the main reasons someone with good credit keeps it. Your SSN is the key to protecting your personal property. Identity theft can ruin a good credit report faster than you think.

2. Never put your SSN on your hard drive.
Don't read anything into this. I love computers, the internet, and the whole cyber age. But every keystroke is recoverable and with that number, your laptop becomes an important target for the opportunist.

3. Check all of your statements when they come in and phone your bank weekly. They will provide you with the best window on how you are doing. It may not be very exciting reading, but they are important. Calling you bank weekly is important as well. Most have an automated line that will read off check numbers as they clear. If you have made a large payment, follow-up on the receipt of that payment. No method is foolproof, but some are better at being thief-proof. Pay by check, the old fashioned way, every chance you get.
AND PAY YOUR BILLS, ALL OF THEM, well in advance of ON TIME!!!

4. Thieves will tell you, the best item to steal is still a checkbook.
Leave it at home; get a debit card or a small credit limit credit card for times when it might be suddenly out of sight, such as in a restaurant or bar. Use that card for internet transactions as well.

5. Don't fall prey to emails from what appears to be your bank, eBay, PayPal or any other official looking notes asking you to update your information.
This is called phishing and the reason these spammers send out millions of these kinds of emails is because they know, someone will bite. Same goes for automated calls that ask you to update your personal information. Remember, they are looking for someone who might have an account at that bank, might be already having some account issues, and might just be gullible enough to respond. These requests sometimes show up on your voicemail. Call the bank or credit card company using the number on the back of your card and verify their request. You can also register your number here: Do Not Call List

6. Check your credit report once a year for free at the following address:


AnnualCreditReport.com
P.O.Box 105281
Atlanta, Georgia 30348-5281
1-877-322-8228

Here are five things you may not understand about your credit score:

1. Don't open another credit card account.
You probably have enough. Avoid department store come-ons to save 10% on your purchase by opening a store card. Chances are that 10% will cost you more when you apply for a big loan like a mortgage than the savings you received at the counter. A lot of department stores do not report their credit limits to the reporting bureaus, which can have a negative impact on your report but not necessarily you credit score.

2. Closing credit card accounts help your score.
The score, done by Fair,Isaac, Co. or FICO looks at your available credit and how much you use. So the thinking would go like this: If you close accounts, you allow the ones you currently have open balances on to look even bigger. That is exactly what you want to avoid. Most people think about credit when they have been turned down, or they don't get the advertised rate, or they want to buy a house or a car. Well in advance of any application, pay down those small cards, maintain a small balance on the remaining active accounts and pay your bill on time.

3. Debt management and credit counseling hurt the overall score.
That is no longer true. FICO stopped singling out folks who got help about three years ago. In my book, "Building Wealth in a Paycheck-to-Paycheck World" (McGraw-Hill), every chapter reinforces the need for controlling your debt and I offer some good ways of doing it that won't impact your score. Using an agency or a service to help does show up on your credit report for seven years though. So it doesn't matter that your credit health has improved, those bills were paid off, and you are a good credit risk, some lenders will still frown on the help you got. The fact that you failed to make a payment ­ usually many payments ­ on time is all they care about. But if you are in real trouble, get help.

4. Checking your credit score or your credit report will hurt your chances of keeping a good score.
Your credit score is compiled the same way by Fair,Isaac based on whether you can maintain your credit, pay your bills on time, and the kind of credit you have. Missing payments and maxing out cards are two of the worst things you can do to your score. Checking the score does no damage. Taking a creditor up on their offer of more credit will. One thing to note: all of the reporting agencies use the same score but add to it the information they have on you. Because that info can vary from company to company, plan on pulling a report from all three major agencies: Equifax, Experion, and TransUnion.

5. Bankruptcy hurts your credit report/score.
True, but filing chapter 13, which basically is the repayment form of bankruptcy, is better than chapter 7, which wipes your debt clean.

FICO has a fun simulation tool on their site, to see how various actions can affect your credit score.

Four Things You Should Know about Credit Repair

1. It is extremely difficult.
Once you have been flagged for a late payment, you have done damage. Once you let an account become delinquent, you have done even more damage. Getting those marks removed from you account takes a good deal of due diligence on your part.

2. Bankruptcy stays on you credit report for ten years.
Using a counseling service stays on your report seven years. Under the old Fair Credit Reporting Act (FCRA), that seven year clock begins ticking on "the date of last activity" or, in other words, when the last action took place on the account. Under the revised FCRA, the credit bureaus must start the seven year clock on the first payment that you missed that led to the collection or charge off status. Remember, your FICO score is different than your credit report. Your FICO score is added into the report. Lenders sometimes look for the actual score, which can be improved with time but they often just look to see whether you have been accepted or rejected.

3. You need to be throwing out the negative and adding in the positive.
That involves more of a mindset than an actual action. For instance, getting those report negatives removed might not be necessary and can be very difficult. Once they are on the report, it is important to begin replacing them with a steady stream of positive actions such as paying on time. The FHA requires no negative activity for two years. That means you need to show you have fixed your bad credit ways by being a good borrower for two years ­ after the last negatives on your report appear. Rest assured, those negatives will usually mean a higher interest rate, possibly a larger down payment, and a different income to debt ratio if you buy a large ticket item like a house or a car. But repair takes time. Avoid sub-prime lenders who have interesting schemes to get you a loan.

4. Be patient.
Once you have done damage to your credit, the repairing of those financial wounds will take some time. The sooner you try to get back into the credit game, the more costly it will be. The longer you wait, the better the chance for you to exhibit your ability to handle credit and that can translate into better and cheaper loans that you can handle. It is a good time to learn to live with cash and maybe even save a little in the process.

For more information about debt, your credit scores or the new bankruptcy laws, visit our financial education center.