Credit can be a very powerful tool to help you achieve your financial goals. But like any powerful tool, you have to understand how to Manage Your Debt and how it works, or it can get you into trouble.

In this post you'll learn about the basics of credit, like the terms you should know, the different types of credit available, how to compare costs, and the appropriate use of credit.

Credit is simply the temporary use of someone else's money, based on a promise to give the money back at some point in the future. As a condition of extending credit, most lenders will expect you to pay interest on the money that you owe. There are also various fees that lenders may charge, usually when the loan is first made, or originated. You should be aware that lenders are required by law to disclose the finance charge and APR for your loan before you sign. The finance charge includes interest AND fees, and the APR, or annual percentage rate, reflects the true cost of the loan after taking the finance charges into account.

Finance Charge and APR are only two of the credit terms you should know in order to understand credit. Here are a few more terms you should be aware of:

Introductory Rate -- a low APR that increases to a higher rate after a certain period of time.

Grace Period -- the time that new purchases are interest free.

Delinquency -- failure to make scheduled payments on time and/or in the proper amount to your credit accounts.

Minimum Payment -- the smallest amount your creditor will accept each month in payment of your debt.

Credit Limit -- the maximum amount of money available for your use in your credit account.

Due Date -- the latest date your creditor will accept a payment without charging you a late fee.

Fixed Rate -- an interest rate that doesn't change from month to month, or even year to year.

Credit usually comes in one of two basic forms.

Installment credit is where you promise to pay back a specific amount, plus finance charges, over a set period of time, usually in equal monthly installments. A car loan is a good example of an installment loan.

Open-end credit allows you to buy things, or get a loan in the future, as long as the total loan amount does not exceed a certain preset limit. Credit cards are the most common example of open ended loans.

Just because you might have gotten into trouble with credit before doesn't mean you should give up on all credit entirely. Not all use of credit is bad. As we said before, credit can be a very useful tool.

For example, a mortgage allows you to buy a home that will likely go up in value, and the interest on the loan is tax deductible. Student loans can be an investment in your future, and can result in substantial extra income over your working life. A small business loan might enable you to start a business and become totally self-sufficient. And a loan to pay for medical care could prevent severe and expensive health problems later on.

The trick is using credit wisely, and making good choices.

Credit, just like any other product or service, usually has a cost associated with it, and you should comparison shop to get the best deal. Before you accept a credit card offer, be sure to read the fine print. If you carry a balance each month, compare the APR and fees to get the best deal. But beware of low introductory rates that can skyrocket after a few months. If you pay your balance in full every month, make sure you get a card with no annual fee. Take a look at the slide above for some other things to consider when choosing a credit card.

When making a decision about credit cards it can be helpful to make a checklist to see how different cards compare. This slide shows you a sample Credit Card Comparison Checklist. Download your own copy by clicking on the link below, and use it to compare the terms of your existing credit cards, and any new credit cards you might want to apply for.

To recap this post, credit is the temporary use of someone else's money with the promise that you'll pay it back in the future, usually with interest and fees. The finance charge is everything the loan costs you over and above the amount you borrowed. The APR is the true interest rate of the loan after finance charges are taken into account. Lenders are required by law to disclose the finance charges and the APR before you take out the loan. You can use the APR to compare offers from different lenders. Installment loans are for a fixed amount and time. You pay them off in monthly installments. With open-ended accounts, like credit cards, you can borrow up to a set limit, but you don't have to pay it all off within a fixed time. It's important to comparison shop and read the fine print before signing a contract or credit card agreement.