By Tim Pennington
Enquirer contributor

Darla Ridner, 22, a store manager at the Snooty Fox in Mariemont, has had a credit card since she was 14, when her father gave her one with a $250 limit. She surprised a car dealer with her high credit score. The Enquirer/MEGGAN BOOKER

It's a circular problem: Consumers who want to establish credit are often told they need to have credit to get credit.

But the danger for those just starting out with credit is taking the first offer they receive, said James Lucas, vice president and education director for Cincinnati Credit Counseling Services, a nonprofit organization that provides credit counseling and debt management programs to individuals having financial difficulties.

"If someone wants to get credit for the first time, they really need to shop around and not agree to the first deal they see," Lucas said. "It can be tempting because this is the first time someone is giving that person credit. But the danger is a high interest rate that can cause big problems down the road."

Credit cards, and specifically revolving credit such as department store cards, are the biggest culprits.

"If you don't make at least the minimum payment on your credit card or other bills, your creditors will eventually report your account as past due, and that's a bad mark on your credit history," says Janet Kincaid, a senior consumer affairs officer with the Federal Deposit Insurance Corp., which promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions.

MAINTAIN CREDIT

Want a higher score on your credit rating? Follow these guidelines from Geri Detweiler, author of "The Ultimate Credit Handbook:" Pay your bills on time. Paying even a few days late puts you in a different category. Ditto with the mortgage payment. Most mortgages offer a grace period of 10 or 15 days after the due date before your payment is officially late and you're charged a late fee. But for scoring purposes, if you've not paid by your due date, you're late. Own two to four credit cards. Less is bad; so is more, according to most scoring systems, Detweiler says. Keep a checking and savings account. If you have neither, you'll have points deducted. Keep your debt-to-income ratio under 20 percent. Make infrequent requests for additional credit. Your credit file shows how many inquiries have been made about you recently from credit issuers. If there have been more than four over the past year, that's a strike against you, Detweiler says. Stay put. If you've been in your house for four years or longer, and with your current employer for five years or more, you rack up points.

HOW'S YOUR CREDIT?

You can find out through the following organizations: Equifax Equifax Credit Information Services Inc. • P.O. Box 740241 Atlanta, GA 30374 • To order report: (800) 685-1111 • To report fraud: (800) 525-6285 • Web site: www.equifax.com Experian (formerly TRW) National Consumer Assistance Center • P.O. Box 2002 Allen, TX 75013 • To order report: (888) 397-3742 • To report fraud: (888) 397-3742 • Web site: www.experian.com TransUnion LLC Consumer Disclosure Center • P.O. Box 1000 Chester, PA 19022 • To order report: (800) 888-4213 • To report fraud: (800) 916-8800 • Web site: www.transunion.com

"Not only that, but paying less than the minimum can result in late fees and additional interest charges, which can add up quickly," Kincaid said.

College students are notorious for getting into deep debt while trying to establish credit, Lucas said, adding that on-campus offers for credit cards are tempting to the inexperienced consumer.

The U.S. Department of Commerce reports that less than 50 percent of all credit card accounts held by students are paid off each month, and that the average college undergraduate carries a balance of more than $2,700.

Offers galore

Darla Ridner, a recent graduate of the University of Cincinnati with a communications degree, saw all the pitfalls of overextending credit during her four-year stay in college.

"Every time you bought something at the bookstore, they would stick a credit card offer in the bag," said Ridner, 22, a store manager for Snooty Fox in Mariemont. "It's in a student's face every day, so it's easy to fall into that trap."

Ridner, however, didn't fall for it. In fact, she recently scored one of the highest credit ratings at the auto dealership where she purchased a new car in May. Ridner has had a credit card in her name since she was 14, when her father gave her one with a $250 limit.

"I love to shop, but I know I have to pay off my debts or I won't be able to shop any more," she said. "I'm probably the biggest nightmare for a credit card company because I pay all my bills at the end of the month."

Lucas, whose Cincinnati Credit Counseling Services does not charge consumers but relies on donations from banks and credit card companies, says he is seeing more people in his office with overwhelming financial debt at a younger age.

"About 20 years ago the core group for us were between 35 and 55 years old," Lucas said. "But now we see many people in their early 20s who need help. They obviously started off on the wrong foot, and the goal is to get them back on track."

Start by saving

Lucas advises consumers who need to establish credit to start by saving their money in a bank, then being disciplined in what they buy and how they buy it when it comes to financing the purchase.

"It's OK to go buy that sound system for your car or home theater, but what's not OK is to get into a deal for credit with outrageous rates and terms," Lucas said. "People will spend days and weeks shopping around for a digital camera or stereo, but not a lot of time on how they will finance it. I advise people to walk out the door and find better financing terms."

Surprisingly, Lucas does not recommend paying off a credit account too soon. He suggests paying more than the minimum required each month, but keeping the account active in order to show credit companies you can meet obligations over a period of time.

And a good or bad credit rating affects more than just a pocket book. Car insurance, buying power - and even that new job they are going after are affected by a person's credit rating as more potential employers are scrutinizing an applicant's credit reports when they hire.

Ridner said she plans to keep her good credit rating going, but she'll still shop at Saks.

"Credit is good if you are reading the fine print and being a smart consumer," she said. "I don't think the auto dealership where I bought my car expected my credit rating to be so high, but it's all just common sense and hard work."

E-mail timpennington@fuse.net