Thanks to credit cards, you don't have to carry cash or fumble with checks when you make a purchase. Instead, hand over that small piece of plastic and, conveniently, it's yours. If you manage your credit well, you get a reward - the ability to buy big ticket items like a house or a car.

For many, however, credit cards are a little too convenient. When you don't have to lay out cold hard cash, it's surprisingly easy to live above your means and abuse your credit. Then you learn a hard lesson the hard way: no one extends credit required for a mortgage or a car loan to a person with a poor credit score. Lots of people find themselves with ruined credit, stuck paying off years of accumulated debt. Sound familiar? Worried you just might be doomed to tenant life and second-hand cars? Not necessarily.

For many, however, credit cards are a little too convenient. When you don't have to lay out cold hard cash, it's surprisingly easy to live above your means and abuse your credit. Then you learn a hard lesson the hard way: no one extends credit required for a mortgage or a car loan to a person with a poor credit score. Lots of people find themselves with ruined credit, stuck paying off years of accumulated debt. Sound familiar? Worried you just might be doomed to tenant life and second-hand cars? Not necessarily.

The most important step towards healthy credit is to make sure you pay all bills on time. Outstanding bills count against you and are noted on your credit report. By paying bills before the due date, you are ensured a more positive credit rating.

But let's be realistic here - everyone has a setback. What happens if you can't make a whole or even part of a payment for one month? The worst thing you can do is avoid the problem. Never put off a bill to the next month if you're short on cash. Contact your creditors and explain the situation. In most cases, they will work with you to reach a compromise. For instance, they may lower your minimum monthly payment.

Don't let a bill slide 60 days past the due date. While creditors don't always report accounts that are at 30 to 40 days overdue, once you cross the 60 day mark, the delinquent payment will likely be recorded in your credit history.

Although it might seem counter-intuitive, it's not necessary to cancel or consolidate all credit cards. Creditors want to see open accounts, used and paid for in a timely manner. An active credit card with low balance, paid on time, builds more credit than a cancelled or even unused card.

So, keep balances low. First of all, they're easier to pay off, secondly, low balances show potential creditors you're a safe bet since you're not constantly maxing out your credit cards. If you can manage to be conservative about your spending habits, your many credit cards can work in your favor.

If you have too many credit cards and want to avoid temptation, go ahead and cancel an account or two. But don't do this just before applying for a loan; creditors like open accounts more than cancelled ones.

Check your credit report every six months to a year. Make sure that there are no errors anywhere on the report. Mistakes, even those you don't know about, can lead to bad credit. If you find a discrepancy on your credit report, correct it immediately.

If possible, don't move debt around from card to card. Pay off each account in a timely manner. Moving it around or transferring balances only puts a band-aid on the problem. Remember, creditors are in the business of finances, they know all the tricks. You can't hide outstanding balances in other outstanding balances.

If paying off debt has become a serious issue for you, meet with a credit counselor. Do your research and make sure you're seeing a legitimate, reputable professional. There are a lot of scammers out there, especially on the Internet, who will take your money but do absolutely nothing to help your cause. Check out potential counselors with the Better Business Bureau. A true credit counselor negotiates between you and your debtors to work out an affordable, practical solution for all involved.

Once your credit score is within the acceptable range, use your new, healthy credit wisely. Pay bills on time and don't let your credit cards and outstanding loans escalate out of control. To do so can mean the difference between becoming a homeowner or remaining a tenant.

LegalZoom is not a lawfirm and can only provide self-help services at your specific direction. Information contained above is subject to change and is not applicable to every state. Visit LegalZoom.com for specific state-by state-documents.

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