There's a lot to know about credit and ignorance can prove to be extremely costly to your pockets and your credit score. It helps to know at least the basics about credit, even before you get your first credit card. Understanding how credit and credit cards work helps you make the right decisions about choosing and using your first credit card.

Eighteen is a liberating age. You're legally an adult. You can vote. And, you can get a credit card. As eager as you may be to get your first credit card, many credit card companies aren't so eager to give you one. Rather than putting in several credit card applications, target just a few companies that are known for giving credit cards to first-timers.

Remember when you were younger, how fascinated you were whenever you saw someone using a credit card. Back then, it seemed like credit cards were magical squares of plastic that could easily and conveniently be substituted for cash. If you haven't figured it out yet, here's one fact about credit that you must know: it's not a cash substitute, but rather a loan that you must pay back with your future income.

Society is becoming increasingly dependent on using credit to make purchases and decisions. These days, good credit is used for more than just getting a credit card or a loan. More and more businesses are making the case that your credit should be used to make decisions about extending goods or services to you.

Think of credit as a tool much like a hammer or a screwdriver. To use a tool correctly, it's important to know as much as you can about it. Here are 10 things you must know about credit.

Did you know that all your credit card payments - and non-payments - are compiled into a single document known as your credit report? Did you also know that the information in this report can be given a numerical value called a credit score? Your credit report and credit score are the two primary methods that creditors and lenders make a credit decision about you.

Have you ever stood behind someone in line at the store and watched him shuffle through a stack of what must be at least 10 credit cards? Consumers with this many cards are still in the minority, but experts say that the majority of U.S. citizens have at least one credit card -- and usually two or three. It's true that credit cards have become important sources of identification -- if you want to rent a car, for example, you really need a major credit card. And used wisely, a credit card can provide convenience and allow you to make purchases with nearly a month to pay for them before finance charges kick in.

Before we get into shopping for a card, let's go over some important terms you'll encounter in credit-card brochures or discussions with potential lenders

Some credit cards, such as American Express, require you to pay off all of your charges each month. As a benefit, they usually have no finance charge, and sometimes no maximum limit. Most cards, including Visa, MasterCard, Discover and Optima, offer what is known as revolving credit. This means they let you carry a balance, on which they charge interest (finance charges), and they require you to make a minimum payment. The minimum payment is usually about 5 percent of your current balance or $10 -- whichever is more.

The first class is required for finance majors; the second is one of several that non-finance business majors can choose from; Me and My Money is an elective, regardless of field of study What role credit cards play in the classes: "The primary emphasis of each class is different, but with respect to credit, we hope all students will take away sound debt-management principles and realize that problems are easily created that may take years to rectify," says professor David Dumpe. Students learn how to calculate the length of time it will take to pay off a $3,000 credit card balance at 22 percent interest if they only make the minimum payment and don't charge anything else. (The answer, says Dumpe: "It usually ends up being close to 13 years. It will be longer if the minimum payment decreases as the outstanding balance decreases.")