During the Great Recession, in particular, millions of American households found themselves underwater — and many of these households are still trying to put the pieces of their financial life back together.

When people develop bad credit, a common reaction is to get off the credit horse entirely and simply stop using credit, says Melinda Opperman, Senior Vice President of Community Outreach and Industry Relations for Springboard, a nonprofit credit counseling agency. But that’s exactly what you don’t want to do.

“To rebuild credit, it’s essential to use credit,” says Opperman. “And you have to rebuild that credit score, because your credit score determines your financial success going forward in so many ways.”

If you’ve been hit with long-term unemployment or other financial hardship, here are four steps to get back on the credit horse and rebuild your credit:

1. Create a budget and a debt repayment plan.
There is no way around it. To get out of debt, you will have to put yourself on a budget and create a plan for how much you will pay off at a time. Many people with financial problems resort to paying only the minimum amount due on their credit cards. However, paying only the minimum amount is a band-aid solution that helps you ignore the real problem — and it quickly lands you deeper into credit card debt.

To force yourself to address your debt problem, look for ways to pay down your credit card debt each month. Freeing up money to make debt payments means prioritizing debt payments over other, more desirable purchases and expenses, and that is rarely fun. Unfortunately, to get out of hardship, you have to go through hardship, so be ruthless in your spending priorities.

2. Pay off high-interest credit card debt first.
Target credit card debt with the highest interest rate first. If you have credit card debt with default penalty interest, call the card issuer and try to negotiate a better rate. Many card issuers will go a long way to work with cardholders in order to avoid having them default on their credit card debt.

3. Maximize the positives.
If you have defaulted on credit card debt or other loans, adding positive actions, such as regular payments on other credit accounts, will counteract the negative marks over time.

“You’re given points on your credit score for positive credit behaviors and points are taken away for negative credit behaviors,” explains Opperman. “It’s very important to establish positives to offset any negatives you may have. Even if a few accounts can be kept current, that will offset some of the negative effects and will help reestablish credit.”

To add positives to your credit history, pay all of your credit card bills on time and pay more than the minimum amount due. If your credit card accounts have been closed because of past defaults, consider taking out a secured credit card or other credit card for bad credit to reestablish a payment history.

4. Consider credit counseling.
Getting rid of debt and rebuilding credit is a long process. That’s why you might want to consider getting outside help — particularly if you’re dealing with creditors. Having an experienced coach to guide you through the process can make a big difference.

A good credit counselor will not just help you develop a budget and a debt repayment plan; he or she may also help you negotiate better terms on loans or lower rates on credit card debt.

Unlike debt settlement programs, which are fraught with scams, there are many legitimate nonprofit agencies that provide credit counseling. To find a credit counseling agency, Mike Sullivan, Director of Education for Take Charge America, recommends looking for a nonprofit agency that is a member of either the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies, two leading national associations of credit counseling agencies.

Another option is to check the Better Business Bureau website for a local credit counseling agency with a great rating. An initial phone call to an agency is usually enough to let you know if you’re in the right hands.

“You should get real help and real advice and not get pushed into doing anything that will cost you money,” says Sullivan. “If you call someone for help and the first thing they do is to get you to send money, then hang up.”

Adding a spouse or other family member as an authorized user on a credit card can often boost that person’s credit within a very short period of time. But there are also significant pitfalls to the practice — which is why it pays to know what you’re getting into.

Common instances of piggybacking include parents adding a teenager to a credit card to give him or her the first (supervised) experience with credit — or a couple deciding to share a credit card to improve the credit of a partner with weak credit. Once a person is added to a credit card account, the credit history associated with that account will appear on the credit report of the authorized user as well. If the account has a long history of regular payments and responsible credit use, that positive record becomes reflected in the credit score of the authorized user.

However, despite the advantages of credit card piggybacking, sharing a credit card account often comes with its own set of problems. In contrast to a jointly held account, where both users are on the hook for the credit card charges, authorized users on a credit card are not liable for charges to the account; only the primary cardholder is liable if a payment is late or missing.

“The authorized user has the best of both worlds,” says Gail Cunningham, Vice President of Public Relations with the National Foundation for Credit Counseling. “He or she gets charging privileges, but has no responsibility for paying the debt.” Needless to say, this is one reason why adding an additional user to a credit card can cause problems.

“We all come into relationships with baggage, and some of that may be financial,” Cunningham notes. “If the couple doesn’t have the same values around spending and saving, it very quickly shows up, when one person is an authorized user on the other’s credit card.”

The primary cardholder may discover that the person added to the account racks up far more charges than expected—and has different standards for how quickly those charges are paid off. Similarly, in the case of divorce, the primary cardholder may not remember to remove his or her ex as an authorized user and could be unpleasantly surprised down the road when bloated credit card bills begin to land in the mailbox.

But piggybacking can also be a drawback for the authorized user. If the primary accountholder doesn’t make payments on time or carries high credit card balances, the bad marks on the account will reflect poorly on the authorized user’s credit as well.

In other cases, being an authorized user simply makes it a lot harder to keep close track of your expenses. This was the experience of Mary, a writer in Des Moines, Iowa. Her husband was trying to meet a spending limit to get into a higher rewards category on his frequent flier rewards card, so he proposed adding her as an authorized user on the account. That way, all their everyday expenditures could be channeled through the rewards card.

It seemed simple enough, but Mary soon discovered that she no longer was able to monitor her spending as closely as she would like. She and her husband had separate incomes and kept separate checking accounts; so he would compile her expenditures every two or three months and then present her with a bill for reimbursement.

“Because I didn’t have a statement arriving with my charges every month, I lost track of my spending,” Mary recalls. “Every single time, I was shocked to learn how much I had accumulated in charges. And worse, online trial subscriptions and other purchases I had meant to cancel sometimes went unnoticed for months.”

Fortunately, it’s not difficult to remove or be removed as an authorized user on a credit card; and both the primary cardholder and the authorized user can make the request. Simply call the card issuer and request that the person be taken off the account.

For most major card issuers, the change will be effective immediately; however, for American Express cardholders, it can take as much as 24 hours before the authorized user is removed. Wells Fargo also asks credit card holders to send in a written request; the account change won’t take place until the bank has received the letter.

Even though it’s easy to get out of a shared credit card account, it may not be so easy to work your way out of the problems that it created. So be cautious before offering to add someone to your credit card or agreeing to be added.

To avoid surprises down the road, make sure that each of you have the same expectations about how much will be charged to the credit card each month, and how those charges will be paid off. If the credit card will be carrying a balance, carefully consider the impact on your credit score before entering the arrangement. The more you talk though potential scenarios up front, the fewer surprises you’ll have later on.

If you’re one of the millions of Americans struggling with credit card debt, take heart. A slew of online services offer great tips and tools to pare down your debt faster. Here are CreditCardGuide.com’s picks for four of the most useful financial management websites.

1. ReadyFor Zero.com
ReadyForZero.com bills itself as a free online financial tool that lets users track credit card debt, explore different repayment options and create an easy-to-follow plan to eliminate debt. ReadyForZero collects users’ debt information in one place so that users know exactly where they stand. The tool is great for people who have credit card debt spread out over multiple credit cards and who may only have a general idea of what their total credit card debt is.

Once a user’s credit card data is entered, ReadyForZero crunches the numbers and creates a customized debt management plan. Every month, users receive an e-mail with a “plan of action” for the month, detailing how much to pay on each credit card and what additional steps a user can take to get out of debt faster. ReadyForZero constantly updates the numbers, making it easy for users to keep track of their progress.

The bottom line: While not a “magic solution,” ReadyforZero is easy to use and a great way to determine the best path to getting rid of credit card debt. And, with the cost of use the same big zero as users’ target credit card debt, many people will find that they are indeed ready for zero.

2. Buxfer.com
It’s hard to get rid of credit card debt without embracing the B-word, and for people who are looking for a little help sticking to a budget, Buxfer.com offers some great tools.

Buxfer is a general personal finance website that allows users to sync their expenses from checking, savings and credit card accounts in one place. The site offers interactivity with numerous mobile devices and makes it easy for users to instantly check account balances or report cash expenses on the go. Buxfer also lets users set savings goals while tracking their projected financial future.

A particularly useful feature for people looking to get rid of credit card debt is the “Spend Less Than You Make” option. This feature allows users to set monthly spending limits for things like groceries, auto care and discretionary spending. Users then get real-time alerts on their smart phone whenever they are close to passing their budget limit.

The bottom line: If you can stand turning your smart phone into an ever-watchful Jiminy Cricket, Buxfer offers great tools to track monthly expenditures and help you stay within a budget. The free membership is limited to five financial accounts; but, for most users, this is likely sufficient.

3. Wesabe.com
Consumers looking for a more human connection might be interested in Wesabe.com, a personal finance site with a social networking twist. Billed as a “community of real people dealing with real money issues,” Wesabe users share tips online to help each other make the most of their finances. Unlike most other personal finance sites, Wesabe doesn’t require users to aggregate their accounts (although it is an option).

Instead, users assign “tags,” which they can use to make a budget and track their spending. These tags, in turn, generate money-saving tips. The tips are accumulated from the shared experience and collective wisdom of other users, often resulting in novel and creative money-saving tips.

The bottom line: Like Buxfer, Wesabe offers mobile access. However, the tools and financial reports are more limited, so the site offers the greatest value for people looking to increase their financial savvy by interacting with like-minded “Wesabeans.”

4. PlanWithVoyant.com
For consumers looking for help with long-term financial planning beyond “just” getting rid of credit card debt, PlanWithVoyant.com features a unique set of “wizards” that let users work through different financial scenarios to create a personalized plan.

The site offers three different wizard paths with varying levels of complexity: Express, Basic and Expert. Users input their financial information, major events, plans and goals they are targeting, along with their desired timeline for slashing debt. The PlanWithVoyant wizards then run different scenarios and show users what they need to prioritize in order to meet major goals — such as paying off credit card debt within three years. The site even offers “emergency scenario” simulations in which users can see what would happen to their finances if disaster struck.

The bottom line: PlanWithVoyant excels in making it easy to see how prioritizing one aspect of your financial life affects another. For instance, you can easily run a simulation to see if you can pay off your credit card debt in five years and still afford to get a new car. The site’s tools make it much easier for users to make some of the hard choices that getting rid of credit card debt inevitably entails.

According to Fair Isaac, the company that created FICO credit scores, an estimated 22 million Americans have no credit record, an additional 30 million have too limited a credit history to give lenders a reliable picture of how lending worthy they are.

Fortunately, while it may seem like the cards are stacked against people with no or little credit history, it is easier than ever to begin to build a credit history, and you could see results in as little as 6 to 12 months. Here are some of the steps to take to start building your credit report and develop an excellent credit score:

1. Find out what’s already in your credit file. Many people have some degree of credit history, even if it’s too limited to provide a basis for lending. Even consumers who have never had a credit card or carried a loan could have a report on file, especially if they’ve shared accounts with a spouse, for example. It’s important to see what the lenders see, so pull a copy of your credit report at www.AnnualCreditReport.com. By law, every U.S. citizen is entitled to receive one free yearly report from each of the three major credit bureaus: Experian, Equifax, and Trans Union.

Check for errors on your report (either due credit bureau mistakes—or worse, identity theft) and make sure that the credit report reflects the most up-to-date information regarding your name and address, and any types of loans or credit you have carried or continue to carry.

2. Establish a checking and/or savings account. Credit card issuers view bank accounts as a sign of stability: consumers who keep money in the bank have money with which to pay bills. Also, once a consumer has established a relationship with a bank, they may be able to take advantage of small personal loans or credit cards issued by the bank.

3. Apply for a car loan and/or a small consumer loan. Local banks and credit unions are often more likely to extend credit to their loyal customers than larger, impersonal banks. Consider using a savings accounts as collateral; or, the bank may require a co-signer on the loan. The point of the loan is to begin to build a track record demonstrating that you can manage credit responsibly. When you make regular, on-time payments on the loan, this positive borrowing behavior will be reported to the credit bureaus and lay the foundation for a good credit score, as you build up your credit history. On the other hand, late or absent payments will result in a credit history with a poor credit score, which is far worse than no credit history.

4. Apply for a retail credit card. Store credit cards are often handed out more liberally than traditional credit cards, so even those with a thin or nonexistent credit file can apply and be accepted. Be aware that these cards often come with higher interest rates, however, so only make charges you can pay off before the next billing cycle. Also, not all store-branded cards report payments to the credit bureaus, so check to ensure that the card activity is indeed reported.

5. Apply online for a credit card. Lenders may issue you a credit card with a low limit, particularly if you’re a young adult, just starting out. Some card issuers, such as Capital One, are more open to people with limited credit histories, while others, like American Express, tend to favor card issuers with more of a track record.

If your credit card application gets rejected, simply wait six months and try again. If you have established the other lines of credit mentioned above and made regular payments, after six months your credit history and credit score may be sufficient to get your credit application approved.

6. Show that you can manage credit wisely. Once you have a credit card and other forms of credit, focus on building an excellent credit score. Pay all bills on time, not just credit card bills or loan payments. In addition, keep credit card balances low. It is best to not use more than 30 percent of the total available credit on the card, and preferably keep balances at 10 percent of the credit limit. Otherwise, it will look like you’re too dependent on credit, which will lower your FICO score.

With these simple steps, you will be well on your way to establish a credit history and build an excellent credit score. The rest from here is simply time, consistency, and patience.

While Americans for the past two decades have enjoyed easy access to credit in general and credit cards in particular, the future for obtaining credit does not look as bright. Lenders, credit card issuers and other types of companies that extend credit to consumers are tightening guidelines for approval, making it harder to obtain credit. This is true for those who have low credit scores, but people who do not have a credit history at all find it just as difficult to get any form of financing.

This is why it’s important to take steps early on to establish a credit history and start building a great credit score. But that can be a Catch-22. You have to have credit to build credit. Without a credit history, lenders will be more reluctant to extend credit to you; unfortunately, without having some types of credit in your name, you can’t begin to establish a credit history.

The good news is that it is easier than ever before to establish a credit history. There are two main reasons for this. Firstly, because all information regarding your credit transactions are processed electronically nowadays, it doesn’t take as long to establish a credit history. While in the past, building credit could be a year-long process, nowadays, you can create enough of a credit trail to get a credit history and credit score in as little as six months.

The other factor that makes building credit easier than before is the ready availability of credit cards. Even though lending rules have tightened, credit cards remain one of the easiest types of credit to obtain, making them one of the best ways to give your credit history a jumpstart.

To build a credit history with a high credit score in the shortest time possible, follow these three simple steps:

1. Get credit. You can apply for a credit card online, however, if you’re just starting out, it may be easier for you to obtain a credit card through a bank with which you already have an account established. Many banks, both local and national, issue their own credit card; if this is the case for your bank, it’s a good place to start. If you are young, applying for a student credit card is another easy way to go, although you will need a cosigner if you’re under 18 (or under 21, once the new credit card rules step into effect in February 2010).

2. Manage credit. Once you have obtained a credit card, it’s important to use it responsibly. Charging manageable amounts, making your payments on time and paying off credit card balances instead of letting them accumulate are three of the key actions you need to take to show that you can manage credit. This in turn will help you build and maintain a good credit history.

3. Expand credit. Your credit score thrives on having various types of credit, so over time, apply for different types of credit—student loans, auto loans, mortgages, etc. Diversifying the type of credit you manage helps to build a credit history and improve your credit score. At the same time, however, don’t go deep into debt, have a mix of 2 to 3 different types of credit, but keep balances low.

These three steps together make up about 90% of your credit score. The fourth factor that comes into play is the length of your credit relationships, so the earlier you start building a credit history, the better. As the recession continues, lenders and creditors may continue to tighten lending criteria and make it harder to obtain credit, so if you haven’t already started building credit, now is a good time to start.

The three major credit bureaus that issue credit reports are Equifax, Experian, and Transunion. These companies collect, store, and sell the details of your credit history based on the information they obtain from smaller regional bureaus, or directly from credit card companies and other lenders.

You are allowed one free copy of your report per year from each of the three credit bureaus. In addition, you can get a free online credit report from Experian. Please click here for more information on how to obtain a free copy of your credit report.

1. Excellent credit — you have no debt, or your debt is relatively small compared to your income (the higher the income, the better, of course) and you have no reports of late payments or missed payments on your credit reports.
2. Good to average credit — your debt may be somewhat high compared to your income or you have 1 to several late payments, but no failures to make payments.

   The better your credit rating, the more likely your application will be approved. The credit cards we recommend for the above two categories are:

   Citi Cards
   American Express cards
   Discover cards
   Capital One cards
   Bank of America cards
   Advanta (business cards)

   To find out how you are rated by the credit reporting agencies, please visit the credit reports page.

3. Bad credit — your credit history includes high debt, default on payments, and present or past bankruptcy.

   There are banks which specialize in providing credit cards to people in this category. See credit cards for people with poor credit to find the card that meets your needs.

4. No Credit — no credit history, usually students and young people. There are credit cards which are geared for people in this category. See student credit cards and cards for people with poor credit or who want to build a credit history.

Click here for more information about your credit history and improving your credit score. Your credit history, amount of debt you carry, and your income is also important in determining the following:

1. The type of card you get approved for (Platinum, Gold, Standard, Secured etc.)
2. The credit limit you get approved for
3. Ongoing Annual Percentage Rate (APR). Some cards have a range of APR’s. The card issuer will assign you an APR depending on how you rate with them. Please read the “terms and conditions” for each card to find out its ongoing APR range. Some cards will offer one ongoing APR only.

Many federal and state laws put limits on what can be done with the information in your report. The Equal Credit Opportunity Act, for example, prohibits discrimination based on age, race, gender, marital status, religion, color, national origin, or the receipt of public aid. A creditor cannot use these factors to refuse you credit, allot you less credit or offer you different terms for which you otherwise might qualify. Other laws spell out similar restrictions for the use of the information in your credit report.

In addition, your credit report lists any recent inquiries made about your credit history. Every time you apply for a loan or credit card and the lender requests a copy of your credit report, that inquiry is noted in your credit history. Too many recent inquiries may lead the lender to conclude that you have a pressing need for credit. This can count against you in their decision.