A credit card is a great financial tool. It can be more convenient to use and carry than cash, and it offers valuable consumer protections under federal law. At the same time, it's a big responsibility.

If you don't use it carefully, you may owe more than you can repay, damage your credit rating and create credit problems for yourself that can be difficult to fix. Chances are your email is full of offers from credit card issuers. How do you know if the time is right for a credit card?

Here is some important information that may help you determine whether you're ready for plastic, what to look for when you select a company to do business with, and how to use your credit card responsibly.

Qualifying for a Credit Card

If you're at least 18 years old and have a regular source of income, you're well on your way to qualifying for a card. But despite the invitations from card issuers, you'll still have to demonstrate that you're a good risk before they grant you credit. The proof is in your credit record.

If you've financed a car loan or other purchase, you probably have a record at a credit agency (CRA) (The most common type of CRA is the credit bureau).

This credit history shows how responsible you've been in paying your bills and helps the credit card issuer decide how much credit to extend. Before you submit a credit application, get a copy of your report to make sure it's accurate. Contact the credit bureaus listed in the telephone directory under "credit" or "credit rating and reporting."

Because more than one credit bureau may have a file on you, call each until you locate all the agencies maintaining your file. The three major credit bureaus are:

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Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
1-800-685-1111

Experian (formerly TRW)
P.O. Box 949
Allen, TX 75013-0949
1-888-EXPERIAN (397-3742)

Trans Union
P.O. Box 390
Springfield, PA 19064-03090
1-800-916-8800

Anyone who takes action against you in response to a report supplied by a CRA – such as denying your application for credit – must give you the name, address and telephone number of the credit bureau that provided the report.

Establish a Good Credit History

Suppose you haven't financed a car loan, a computer, or some other major purchase. How do you begin to establish credit? First, consider applying for a credit card issued by a local store and use it responsibly. Ask they report to a credit bureau. If they do – and if you pay your bills on time – you’ll establish a good credit history.

Second, consider a secured credit card. It requires that you open and maintain a bank account or other asset account at a financial institution as security for your line of credit. Your credit line will be a percentage of your deposit, typically from 50 to 100 percent. Application and processing fees are not uncommon for secured credit cards. In addition, secured credit cards usually carry higher interest rates than traditional nonsecured cards.

Third, consider asking someone with an established credit history -- perhaps a relative -- to co-sign the account if you don't qualify for credit on your own. The co-signer promises to pay your debts if you don't. You'll want to repay any debt promptly so you can build a credit history and apply for credit in the future on your own.

A positive credit history is an asset, not only when you apply for a credit card, but also when you apply for a job or insurance, or when you want to finance a car or a home.

If Your Application Is Denied

If you've been denied credit because of information supplied by a credit bureau, federal law requires the creditor to give you the name, address and telephone number of the bureau that supplied the information. If you contact that bureau within 60 days of receiving the denial, you are entitled to a free copy of your report. If your file contains accurate negative information, only time and good credit habits will restore your credit-worthiness. If you find an error in your report, you are entitled to have it investigated by the credit bureau and corrected at no charge.

You should dispute any inaccuracy in your report with the credit bureau and also with the company that furnished the information to the credit bureau.