MANAGING YOUR MONEY / Earning More, Keeping More : GIVE YOURSELF CREDIT : <i> But be careful, experts warn. Borrowing has never been so easy--or so potentially dangerous. A few simple rules are in order.</i>

Cash might be king, but credit is everywhere.

Television advertisements tout credit cards as tickets to the good life. Consumers are tempted with appliances, cars and other big-ticket items on “easy terms.” Even grocery stores, the epitome of a cash-and-carry business, now accept Visa and MasterCard to lure shoppers.

Credit has never been so widely available--or as potentially hazardous. With the sluggish economy, a growing number of borrowers are finding themselves out of jobs and saddled with heavy debt loads.

In uncertain times like these, users of credit should be careful to follow a few simple rules and to remember the advice of credit counselors who say consumers now should be more concerned with saving than borrowing .

Don’t forget that having access to thousands of dollars in credit isn’t like having a few thousand dollars in a savings account. The money you spend when you use a credit card or take out a loan belongs to the bank, not you, and will eventually have to be repaid.

“The real danger I see is people using credit as if it’s additional income,” said Gerald Sims, a San Diego attorney who specializes in bankruptcy. “Credit does allow people to live beyond their means for a period of time, beyond what their true income is. But that doesn’t last.”

Forethought is the key to using credit wisely, said Irene Freeman, president of Consumer Credit Counselors of San Diego & Imperial County. Her agency is part of a nonprofit network that offers consumers free or low-cost counseling through its 20 offices scattered across the Southland.

“When you use credit, decide when you are going to incur the debt and which specific date you will pay it off,” Freeman said, adding that you should use long-term credit only if you’re acquiring “long-term goods”--such as a home or car--that can be resold to pay off any outstanding loans if you get caught in a pinch.

Comparison-shopping for credit is essential, whether you’re looking for a new-car loan or a mortgage. You’ll quickly become aware of the wide disparity in what various lenders charge in loan points and interest.

The same is true of credit cards, Freeman said. Don’t automatically snap up the first credit card offer that comes in the mail. Instead, she says, wait for one that charges a reasonable interest rate, or for a card that carries no annual fee.

The Times publishes a list of rates offered by dozens of Southland institutions on their credit cards and auto loans every Monday in the Business section. Each monthly issue of Money magazine includes a list of the least expensive credit card companies.

The Times’ Sunday Real Estate section prints a lengthy list of rates and terms offered by many local mortgage lenders.

Credit cards that make the best sense to Freeman include American Express and Diners Card, both of which demand payment in 30 days. Such cards force consumers to “spend within their means,” she said, while helping them establish a credit history.

Credit specialists advise that no more than 20% of your take-home pay be used to pay off unsecured debt, including department store and bank credit card charges and interest. “That’s your danger point,” Freeman said. Mortgage or rent payments shouldn’t gobble up more than 40% to 50% of your monthly take-home pay, she said.

Sadly, the people who come to Freeman’s credit counseling office usually visit because they haven’t been prudent. Her typical counseling client is 35 to 38, married with two children, saddled with two car payments and a mortgage and is grappling with credit card debt totaling between $12,000 and $15,000--all on an average take-home pay of about $3,000 a month.

“They’re just stretched too thin,” Freeman said.

Contrary to popular belief, people with severe credit problems usually aren’t in trouble because they’ve gone on shopping binges. It’s that they failed to plan for “that rainy day,” said San Diego attorney Radmila A. Fulton, who limits her practice to bankruptcies. Her clients have typically been hit by some external event--huge medical bills, a divorce or the loss of job--for which they are financially unprepared.

“People just don’t seem to set aside sufficient funds to deal with events that happen over the course of one’s life,” Fulton said.

She said most consumers should have an amount equal to at least six months of their income tucked away in savings. “They should try to set aside something so that if unexpected events come up, they are not caught up short,” she said.

A trap many people fall into is using credit cards for living expenses after they’ve lost their jobs. Bankruptcy courts increasingly frown on such credit card use after “debtors know they are in financial trouble and know they can’t repay,” Fulton said, adding that judges often will not shield those debts from a reorganization plan in the event the debtor files for personal bankruptcy.

“My rule of thumb is you should never charge more than your ability to pay at the end of the billing period,” Fulton said. “I have no problem with consumers using consumer credit. The problem comes when the client can’t pay for it.”

Few credit problems are so bad that debtors--even those who have filed for personal bankruptcy--cannot clean them up.

Borrowers should start by obtaining copies of their credit profiles to see where their problems lie, Freeman said. Copies can be ordered over the phone from the three main credit reporting agencies: TRW, Trans Union Corp. and Equifax Inc. TRW offers all consumers one free copy of their credit report per year, but Trans Union and Equifax charge $8 per copy.

Once you have a copy of your report, check it for accuracy. If you believe it includes incorrect information that casts you in a bad light, contact both the credit agency and the creditor to have the blemish removed.

If you can’t reach a satisfactory agreement with the creditor, you can write a letter to the credit bureau that explains your side of the dispute and insist that it be included in your permanent credit file.

More serious credit problems, such as having a bankruptcy on your record, are more difficult to clear up. But even bankrupt consumers can often re-establish their credit, especially if their financial woes were caused by an unexpected misfortune.

“How receptive creditors are in re-establishing credit will depend on why you went into bankruptcy in the first place,” Freeman said.

TIPS

Many financial institutions and credit card issuers offer free information about borrowing wisely. Here are some other agencies that can help.

* The National Foundation for Consumer Credit operates more than 20 Consumer Credit Counseling Service offices throughout Southern California. Each nonprofit office provides a variety of services. Call (800) 388-2227 for the location of the office nearest you.

* The California Department of Consumer Affairs offers a free guide, “From Credit Despair to Credit Repair.” Send your request on a postcard to the Department of Consumer Affairs, Publications Office, 400 R St., Sacramento, Calif. 95814.

* TRW Information Services, the nation’s largest credit-reporting agency, will provide you with one free credit report on yourself each year. To order a report, call TRW’s toll-free hot line at (800) 682-7654.