Q. What makes you start having bad credit?

A.When someone says they have bad credit, they usually mean they have a bad credit score.

That's a number that reflects how much debt you have, and how diligently you pay your bills. Lenders use it to decide whether your application for a credit card, auto loan or mortgage is approved or rejected. Insurers use it to set premiums and employers look at it when you apply for a job.

Your credit score is calculated using a sophisticated formula created by Fair Isaac Corp., which is why it's often called a FICO score. But almost all of the information that goes into your score comes from the personal credit histories kept by three companies -- Experian, TransUnion and Equifax.

Most people have a bad credit score, and therefore bad credit, because they missed a payment on their mortgage, auto loan or credit cards. Just being a few days late on a utility or medical bill can send you on the way to the financial dog house.

Another problem is carrying high balances on your credit cards. Your credit score will be lower if your monthly balance is more than 50% of your available credit. Max out a card -- that means you've spent all of your available credit -- and you'll really take a hit.

The third thing that significantly lowers credit scores, and can saddle you with bad credit, is applying for a lot of credit all at once. Each time you fill out an application for a credit card, personal loan or home equity line of credit, it goes on your credit history and lowers your credit score.

FICO scores range from 350 to 850, with an excellent credit score being above 750, good credit coming in at 660 to 749, and fair credit is between 621 and 659. If your credit score is 620 or lower, you are in the subprime category and are deemed to have "bad credit."

If you've been told you have bad credit, get free copies of your credit reports at AnnualCreditReport.com (Please don't go to the heavily advertised freecreditreport.com. Despite its name, any credit reports you receive from that site will cost you.)

Check those reports to see what your problems might be. You should also look for errors (they're surprisingly common) and have them corrected. Each report gives you instructions on how to fix mistakes.

For more help, take a look at 6 smart moves to improve your credit score.