The first step in obtaining good credit is to purchase an item on installments, maintain a savings account, or by making a purchase with a credit card.  The most widely used method for determining a person’s ability to repay a debt is the use of a credit rating, which is the a report compiled by a credit bureau from the various people who you owe or have owed money.   A good credit rating will be one that reflects prompt payment in all records. Please note that a "no credit" rating may be nearly as bad as "bad credit."

1. Bad Credit
If you have a bad credit rating, clearing it up will depend upon the seriousness of the past problems and the amount and purpose for a new loan. Generally, credit reporting agencies want references on loans and employment for the past five years. A past bad credit rating can sometimes be avoided if the collateral for the present loan is sufficient. Under federal law, negative credit information is stale after seven years except in bankruptcy, which should be removed after ten years.

2. Debt Collection Harassment
A federal law known as the Fair Debt Collection Practices Act limits what debt collectors can do to harass you about debts. In most states, like Missouri, the state laws do not provide much protection against harassment. However, the federal law applies to all debt collectors, including attorneys.

The law applies only to "debt collectors." This means that the person calling you is collecting the debt that you owe to someone else. If the XYZ Company calls you directly to collect their debt, the Fair Debt Collection Practices Act does not apply to them. However, if the XYZ Company hires a debt collection agency to collect the debts, the law does apply to the debt collection agency.

A debt collector may contact you over the telephone, by mail, in person, or by fax. The debt collector cannot call you at unreasonable times or places. Typically, this means that they should not call you before 8:00 a.m. in the morning or after 9:00 p.m. at night unless you agree to let them call you at those hours. A debt collector may call you at work unless you let them know that their employer disapproves of this. If you do get contacted at work, immediately notify the debt collector if your employer prohibits this.

You can request that the collector stop contacting you. You should do this by writing a letter to the debt collection agency in addition to telling them over the telephone. Be sure to keep a copy of the letter for your own records. When the debt collection agency receives the letter, they should not contact you again except to tell you if they are going to take specific action concerning the debt.

The debt collector may contact other people such as friends, relatives, or neighbors to find out information about where you live and work. Normally they can only contact these people once. In most cases, they are not allowed to tell these people about your debt, but only obtain information about your address and work.
A debt collector may contact you initially by telephone. If they do, they are required to send you a written notice within five days telling you the amount of the debt you owe, the name of the creditor that you owe the money to, and what action you should take if you do not owe the money.

If you do not owe all or part of the money that is being collected, you can request that the debt collector verify the debt. For example, if you signed a loan agreement, you can request that they send you a copy of this document. If you dispute the debt, you should notify the debt collector in writing within 30 days after you are first contacted by the collection agency. You should write them a letter explaining why you do not owe the money and requesting that they verify the debt. During the 30-day period after you are first contacted, the collection agency should not contact you again until they provide you proof of the debt.

Debt collectors can call you and request that you pay the debt. However, they cannot harass you or abuse you. They should not: use obscene or profane language; make repeated frequent calls to annoy you; telephone you without identifying themselves; use threats of violence or harm against you; threaten to arrest you if you do not pay the debt; threaten to take action such as lawsuits, garnishments, or taking your property unless the collector intends to do so and it is legal.

Debt collectors cannot make false statements about themselves or the debts. They cannot misrepresent: that they are government officials; that you have committed a crime; that they work for the "credit bureau"; that the papers you received are legal summonses or legal papers, if they are not; the amount of your debt; or that there is an attorney involved, if there is not.

Debt collectors are also prohibited from: depositing a post-dated check before it is due; threatening to take your property unless it is legal to do so; contacting you by postcard.

If the debt collector has violated the law, the Fair Debt Collection Practices Act gives you a right to sue in state or federal court within one year from the violation. If you win, you can recover damages for your loss, court costs, and attorney's fees. Remember that the one-year period runs from the date the debt collector violated the law. You should act promptly to contact an attorney if you believe a debt collector has violated the law.  You can also notify the Federal Trade Commission (FTC) of violations. They cannot file lawsuits on your behalf, but they can investigate your complaints. Their address is: Consumer Response Center, Federal Trade Commission, Washington, D.C. 20580. You can also file a complaint through the Internet.

 3. Special Considerations About Buying on Time
    • Rely on what is in the written contract and not on sales talk. If it is not written into the contract, it is not a part of the agreement.
    • Read every paper carefully before signing; do not sign anything you do not fully understand, and never sign a form with blank spaces.
    • If you have any questions, see an attorney before you sign. Legal advice obtained in advance is much cheaper than a lawsuit resulting from a contract dispute.
    • Co-signing or guaranteeing a debt makes the co-signer equally responsible with the original signer for full payment of the debt.
    • A debtor is entitled to a notice of default and right to cure. But an uncured default or repeated defaults can result in repossession or suit.
    • If a seller/holder repossesses the collateral, he or she may also be able to sue for an additional amount (called a deficiency) if the sale price does not coverthe entire debt.
    • Figure out how much it is costing you to buy on time. Compare the installment sales contract price with the cash price.
    • The disclosure laws give you an opportunity to compare the cost of credit. The federal disclosure laws require that there be four key disclosures: the amount of the loan or other credit, the finance charge (which is the dollar amount the credit is costing you), the annual percentage rate (which is the uniform measure of all finance charges), and the total of payments (which is the finance charge and the principal combined). If you compare these figures from contract to contract, it is very simple to tell which is the best deal.
    • It is absolutely essential to shop carefully for your credit. You should seek rates and terms from at least one bank, one savings and loan, one finance company, and one credit union (if you are eligible); pay off your credit cards before overall cost of the merchandise that you receive on time.
    • You are responsible for making each payment when it is due. If you have a legitimate reason for being late in making a payment, discuss this with the creditor before the payment is overdue. The creditor may be willing to work out arrangements by which you can meet the payments rather than taking legal action for collection.

4. Liability for Unauthorized Credit Card Use
If your credit card is stolen or used by someone you have not authorized, under federal law you are only liable for the first $50.00 of unauthorized debt, and only if the card issuer has informed you that you will be liable for this amount.