"Neither a borrower nor a lender be" was once considered sound advice. But Shakespeare wrote those words a long time ago, and the modern world has different ideas on the subject. Borrowing -- to buy a house or a car, or pay for a vacation -- is part of today's Canadian lifestyle. And lending is a major industry.

For most people in most situations, the ability to obtain credit is a valuable asset. It provides a handy way to shop without carrying large sums of money. It helps us to cope with emergencies, such as a car breakdown or replacing a roof. It can help us to budget our needs and wants.

But credit can have a downside as well. It can encourage us to live beyond our means. High instalment payments can make it hard to meet basic expenses -- things like rent, food and clothing. Interest charges can eat up money that could be used for other things.

In the end, whether to borrow or not to borrow is an individual decision. If you decide you want to make use of credit, check your finances first to see if you can really afford it. Make sure the payments will leave you with enough money to meet other necessary expenses.

Do Your Shopping

Shopping for credit should be the same as shopping for anything else. You have many potential lenders to choose from -- banks, credit unions, trust companies, loan companies, finance companies, life insurance companies, credit card organizations, and retail stores. Interest rates and lending conditions can vary widely, and it will pay you to find out which lending source can meet your particular needs at the lowest cost. Do your homework.

Are You Credit-Worthy?

Your ability to borrow will depend on your credit record -- if you have established one -- and on what lending agencies traditional call the Three Cs:

• Character
  Do you really intend to repay the debt? Have you shown responsibility in handling your finances in the past?
• Capacity
  Do you earn enough to repay the debt? How secure is your job? Do you own or rent your living accommodations? How long have you been there?
• Collateral
  Do you have life insurance, savings, a car, equity in a home, household goods or any other assets that can guarantee repayment?

In addition to the Three Cs, some lending agencies use a "credit point" scoring system to help them make up their minds. Points are assigned for such individual characteristics as occupation, stability of employment, residence and credit references.

Credit Bureaus

Before granting credit, a retailer or lending agency may want to verify the information in your application by checking with a credit bureau. These are private agencies that serve retailers and lenders by collecting information on borrowers from other credit-grantors.

Starting with the first time you use credit, most of your borrowing transactions may be recorded by one of these bureaus. Your file may also contain information on lawsuits, pending litigation or other matters of public record that might influence a lender's decision.

All this information goes into your credit record and helps establish your all-important credit rating. A good rating is a valuable life-long asset. It's in your own best interest to protect it by handling your financial obligations responsibly.

If They Say 'No'

It's estimated that 20 per cent of credit applications are turned down. If it happens to you, don't panic. There are several things you can do.

• You can look for credit elsewhere. Lending agencies want to do business, and there are a lot of them out there. Where one might decline an application, another might gladly accept it.
• You can visit the credit bureau and ask to examine your file. This is your legal right. If the file contains information that isn't accurate, and it can be proved, the bureau is required to make a correction.

Getting Started

You may be turned down for credit because you haven't borrowed before and don't have a credit record. In this case, you might want to consider establishing one. You could:

• apply for a charge account at a local department store or shop;
• apply for a credit card from a gasoline company;
• join a credit union at work or in your community;
• apply to your bank for a personal banking services package deal -- they often include a bank credit card; or
• apply for a loan from a bank or any other lending institution -- and pay it off promptly.

The first time you apply for credit, you may be asked to have someone co-sign your application. Once you have successfully maintained an account, you can usually get further credit without a co-signer.

Borrowing Tips

Once the decision is made to grant you credit, here are some tips to keep in mind:

• Don't sign a credit contract until you have read and understood it. If you don't understand it, ask questions until you're completely satisfied.
• Make sure you understand the total cost of your purchase or loan. Under the Consumer Protection Act you must be given a detailed written statement of the credit costs involved.
• Avoid those "low down payments" and "low monthly payments." The faster you pay, the less it costs. If you have spare cash, make lump sum payments. You'd be surprised how this can reduce the lifespan of a loan and reduce interest charges.

Keeping Your Good Name

It's important to make payments on time. If you run into a situation where you can't -- through over-borrowing, inexperience or unforeseen emergencies -- the first thing you should do is contact the lender. Do this before your payment is due. You may be able to protect your credit record by negotiating an easier repayment schedule.

And don't be afraid to ask for financial counselling, either from your credit-grantor or from a member agency of the Ontario Association of Credit Counselling Services. The important thing is to get your finances in order before they spiral out of control.

To learn more about the regulations governing credit bureaus and collection agencies, call the ministry at (416) 326-8800 in the Toronto area, or toll-free at 1-800-889-9768 in other parts of the province. Special electronic equipment for people with hearing and speech difficulties is available at (416) 325-3408 or toll free 1-800-268-7095.