Credit is a promise to repay an obligation. A credit transaction includes at least two parties:

• The lender provides value in the form of cash, merchandise, or some other item of worth.
• The borrower makes a commitment to pay what he or she owes according to a pre-agreed schedule.

  In this situation, the lender must feel confident that you, the borrower, will repay. The lender, usually a credit card, bank or other financial institution, decides whether to give you credit based on three criteria:

• Credit - your willingness to pay.
• Capacity - your ability to repay the obligation.
• Character - your economic stability.

Credit is offered in a variety of ways. The most common form of credit is credit cards. A credit card transaction is simply a loan, which takes place when the cardholder makes a purchase using the card, and the credit card company pays the merchant on the cardholder's behalf. Typically, the amount owed does not have to be paid in full each month. However, interest is charged on the unpaid balance. Once an amount borrowed has been paid, an equal amount of credit is again made available to borrow.

It's important to check your credit history at least once a year to make sure it's accurate. You can check your credit by contacting one of three credit reporting agencies for a small fee. The three major agencies are: Equifax, Experian, and Tran Union. If you find a mistake, report it to the agency. They are required by law to investigate the claim, usually within 30 days.

To avoid falling into credit problems, here are some helpful tips for everyone to remember:

• Use credit only when necessary and for those things whose usefulness and desirability will outlast the payments.
• Calculate whether the payments can be handled within your monthly cash flow prior to entering the transaction.
• Understand all charges, fees and interest rates.
• Read thoroughly and understand any agreement before signing it.
• Make payments as agreed and if problems arise, contact the lender to try to find alternatives.

Information on this page can be found at the Ford Motor Credit Website at www.fordcredit.com.