For many people, FICO is a term of little relevance until it comes time to apply for a car loan or mortgage. Then, all of a sudden, information about FICO is everywhere -- bombarding them constantly.

Your FICO score is a statistically generated number that indicates to lenders what type of credit risk you are likely to be. The number is based on a variety of factors including: your employment history; the length of time you have been at your current residence; how much credit has been extended to you and for how long; your repayment history; the number of credit cards you have; and your banking activity.

Some people apply for credit for the first time and discover their limited credit history has hampered their ability to secure a good rate. Others apply for an essential car loan and find their payments will be staggering.

The reality is, credit is something you should think about long before you need it. If your credit rating is poor – or you have few entrees in your credit report – applying for credit could be difficult.

To establish and maintain a good credit rating you must first demonstrate you can handle credit and debt responsibly. You can do this by doing any, or all, of the following:

• Apply for a credit card, charge small amounts and pay the balance in full each month. You may only qualify for a credit card with a double-digit interest rate but it doesn’t matter. You will not be paying interest because you will be paying the card off in full each month. You can also apply for a gas card, department store card or a major credit card – as long as you commit to paying it off each month.

• Open a checking account and use it to pay your bills. Maintain a minimum balance to ensure the account is never overdrawn. This will demonstrate that you have money and know how to manage it.

• Borrow money from a family member and use it to make a large down payment on a loan. Then pay the loan off.

Once you’ve established credit it is important to ensure your credit report is accurate and reflects the steps you have taken. Order a copy of your credit report and review it for accuracy. Contact the credit bureaus if you spot errors or omissions.

Staying on top of your FICO score is an excellent way to help smooth the financial waters you and your family will be traveling on.