redit is king. Long live the king?

For years, cash was king. Paying with cash was a sign of success and stability. No more. Today cash looks suspicious. It suggests that you couldn't qualify for credit or perhaps that you engage in some illicit activity and are afraid of leaving a trail.

Credit now wears the crown in America. Today you need a good credit rating to buy a home, to get a good job or a preferred rate on your homeowner's or life insurance policy.

That makes establishing credit and monitoring your credit rating one of the most important financial tasks you face. Fortunately, it's not difficult. But it's just as easy to get off on the wrong foot if you don't know the rules.

"There's an awful lot of misinformation out there," says Gerri Detweiler, a credit consultant and author of The Ultimate Credit Handbook. "Some people make big mistakes because they don't understand the rules."

The first step is to see where you stand. That means getting a copy of your credit report. There are three major credit-reporting bureaus. Unfortunately, they don't all have the same information. That means there is no way to make certain that you have a clean record unless you check all three. Make a note on your calendar to check your report once a year.

To establish good credit, start with one major credit card like American Express, MasterCard, Visa or Discover and pay your bills on time. That means before the due date on the bill.

Sadly, simply paying your bills on time isn't enough anymore. The electronic age has made the credit approval process an impersonal one. Whether you get the loan you want depends on how a computer scores your application.

Do not wait until you need credit to get your report. I did that once. When I had a great opportunity to buy a co-op in Manhattan, my mortgage application was turned down. I discovered there was inaccurate information on my credit report.

Credit issuers have broad leeway to develop their scores based on their experience, provided they don't discriminate against people because of their sex, race, age, religion or national origin. A credit issuer may use age as a criterion of a scoring system if, for example, past experience shows that those in a certain age group are less likely to pay their bills

That's what credit scoring is: A compilation of the lender's experience in issuing credit translated into a scoring system. For that reason, it can be difficult to know precisely how any one lender will judge you. But here are some of the characteristics that will help you get a higher score, according to Deitweiler.

That still counts. What might trip you up though, is that paying even a few days late puts you in a different category. Ditto with the mortgage payment. Most mortgages offer a grace period of 10 or 15 days after the due date before your payment is officially late and you're charged a late fee. But for scoring purposes, if you've not paid by your due date, you're late.

Fewer than this is bad; so is more, according to most scoring systems, Detweiler says.

If you have neither, you'll have points deducted from your score.

Creditors closely track this ratio as a way to gauge your ability to repay. You would never guess it by the number of credit card solicitations you receive in the mail, but the ratio matters when you want to borrow for a home, car or other big-ticket item.

Your credit file shows how many inquiries have been made about you recently from credit issuers. If there have been more than four over the last year, that's a strike against you, Detweiler says.

If you've been in your current home for four years or longer and with your current employer for five years or more, you rack up points.

Lenders also look at your spending behavior. For instance, how close are you to the limits on your various cards, how many cards do you use and what do you carry in balances?

If your report contains errors, write to the credit bureau immediately. Explain what's wrong. For example, suppose your record indicates that you have an account at Nordstrom that is overdue. In fact, you have closed your account at Nordstrom and owe nothing.

In your note to the bureau, be specific: "I closed my Nordstrom account in 1997. The balance is paid off." If you are in a hurry to get the matter cleared up, you might write to the creditor also. That's what I did when I wanted to get my mortgage approved. The creditor sent a letter to the credit bureau stating that my account was closed and paid in full. I got my mortgage loan.

Many of the things that count against you are the obvious ones: late payments, court judgments, an account that was turned over to a collection agency and, of course, bankruptcy.

There are pros and cons to the credit scoring system, Deitweiler says. On the plus side, it eliminates discrimination because approval is based on raw numbers. On the other hand, the scores don't take into account consumers who have exceptional circumstances. If the score is too low, they're turned down. Still, you must understand how it works if you're going to get it to work for you.