That could be because many of us don’t fully grasp the mechanics of credit scores and credit reports. You may realize that having good credit can profoundly affect your financial health, but you may not be sure how to take control of your credit.

Fortunately, it’s not difficult to demystify credit management. A few simple steps can put you on track to take control of your credit this year.

Know where you stand

Your first step toward a healthier credit future is to get a clear perspective on where you are now. If you haven’t looked at your credit report in a while, now is the time. Websites like CreditReport.com allow you to obtain and review your credit report – a move that can empower you to make better financial decisions. You’ll get your free credit score as a reward for enrolling in Experian’s credit monitoring product, a membership that can help keep you abreast of changes – both good and bad – in your credit report and score.

By monitoring your credit report and score on a regular basis, you’ll be better equipped to make financial decisions, and will be more aware of your ability to use credit. Get educated on what’s on a credit report and how credit bureaus use that information to calculate your credit score. Generally, credit reports include detailed information of an individual’s payment history with various creditors. Among other factors, bureaus consider three key things when calculating your score – the length of time you’ve had credit, the ratio of available credit to credit used, and if you pay your bills on time.

Manage your debt

At a time when debt is high in many American households, it may be difficult to remember that not all debt is bad. Debt that is secured by a tangible asset, such as a home loan, or that builds your family’s future, like a college loan, can be good debt as long as you manage it wisely. When looking for a mortgage or college loan, start out by knowing your credit score, then shop around for the best rate and terms. And be sure to avoid borrowing more than you can comfortably repay.

Pay down credit card debt, which is generally perceived as higher-risk – and higher interest – debt. Avoid using credit cards to pay for things that you should be paying cash for, such as groceries, utilities, restaurant meals or vacations. If you use credit for these things, which rapidly get consumed, and you can’t pay off your bill in full right away, you could wind up in debt very quickly.

If you already have credit card debt, never pay just the minimum balance due each month; it would take years to pay off just a few thousand dollars at that rate and you’ll pay much more in interest than the amount you originally borrowed. Always pay more than the minimum, and concentrate on paying off cards or loans with the highest interest rate first.

One exception to the pay-it-off quick rule may be your mortgage. If you’re able to make your monthly mortgage payments without struggling, concentrate on paying off other, higher interest, unsecured debt first. The interest you pay on your mortgage may be tax deductible, but the interest you pay on credit cards is definitely not. If your mortgage’s interest rate is high, look into refinancing to lower the rate.

The tax cut, also known as the payroll tax holiday, was part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passed in December 2010. Employers had until Jan. 31, 2011, to implement the cut.

There is a $106,800 income-earned limit, which means the maximum amount a worker can receive by the end of 2011 from the 2 percent reduction is $2,136.

The payroll tax holiday replaces the Making Work Pay Credit that expired at the end of 2010 that was also distributed in paychecks but through reduced federal withholding. The credit was worth 6.2 percent of your modified adjusted gross income, up to $400 ($800 for joint filers).

Whether your 2011 paychecks are bigger depends on your earned income and whether you received the Making Work Pay Credit last year. Taxpayers making $20,000 or more this year will receive larger paychecks this year because 2 percent of income exceeds the $400 Making Work Pay Credit. On the other hand, paychecks for lower income taxpayers earning less than $20,000 will be smaller because the $400 credit exceeds the 2 percent payroll tax holiday.

“Regardless of whether your paycheck amounts have changed, you should do two things,” says Jessi Dolmage, spokesperson for TaxACT. “First, review your federal withholding. Since the Making Work Pay Credit expired, you may need to adjust your withholding. If you’re self-employed, review your estimated tax payments.

“Second, if you received the Making Work Pay Credit last year, you still need to claim it on your federal return that’s due by April 18, 2011,” Dolmage continued. “Claiming the credit cancels out the reduced federal withholding in last year’s paychecks.”

The Making Work Pay Credit amount is figured on Schedule M for Forms 1040 and 1040A. If you’re filing Form 1040-EZ, use the designated worksheet to figure the credit. The economic recovery payments and government retiree credit that factored into the Making Work Pay Credit on last year’s return expired, so figuring this year’s amount is easier.

Free tax preparation solutions, including TaxACT Free Federal Edition, guide you step-by-step through the Making Work Pay Credit and all tax law changes to help you maximize your credits and deductions. They can also help you figure your federal withholding and even complete a new Form W-4 that can be printed and turned in to your employer.

For more information about the payroll tax holiday and Making Work Pay Credit, visit www.irs.gov, where you can also find a free withholding calculator. To take advantage of free tax preparation, printing and filing with TaxACT Free Federal Edition, go to www.taxact.com.

These days, you can charge just about anything with a major credit card. But some non-plastic payment methods may allow you to get more for your dollar – and keep more of your hard-earned money in your local economy.

Here are a few times you may be paying extra or accepting unnecessary limits on your payment freedoms, and how to avoid them:

* ATM fees. You may knowingly be paying ATM fees, but you might be wise to select a bank that offers unlimited free withdrawals. Most credit card companies will charge you for cash advances from ATMs, but might not reveal the charge during your transaction. Make sure you’re clear on the terms of your card before proceeding.

* Transaction fees. You should be aware of credit card fees that accompany certain transactions. Use cash or a personal check if credit card fees apply to a purchase you’re making. Businesses often have to pay a fee for card transactions, so you support your favorite stores more if you pay with cash or personal check.

* Interest rates and annual fees. Credit cards can be a great way to build credit and earn benefits, but if you aren’t keeping your balance at, or close to, zero, you are losing out big-time by paying interest. If you’re having trouble keeping your credit card balance down, you may want to consider sticking with a card attached to a checking account and your checkbook.

And here’s the biggest surprise: How popular personal checks still are. In fact, 18 billion checks are still processed every year in the U.S. alone — making checks the most frequent form of non-cash payment in America.

Many Americans still prefer having the option to pay with check as well as with credit or debit cards, according to a recent survey conducted by public affairs firm Ipsos on behalf of Deluxe Corporation. Seventy-five percent of consumers said they should have the right to pay with whatever method they wanted when making a purchase at a store – including cash, card or check. Thirty-eight percent of consumers surveyed would consider walking out of, or not returning to, a store or restaurant if that business refused to accept their checks as payment. And one-fifth of consumers say that a sign in a store which says “We Do Not Accept Checks” is an example of ‘bad customer service.’

A new consumer advocacy campaign, “Stand Up For Your Right To Write Checks,” is underway to preserve your option to use checks as a form of payment at www.righttowritechecks.com.

Whatever your preferred method of payment is, by paying a little closer attention to your buying methods, you can end up saving a considerable amount of cash in the long run.

From diapers to baby furniture and day care, the costs for new parents mount quickly. For some, the reality of these expenses is daunting. Others are completely unaware of how the joy of a new child will impact their financial situation.

So, just how much does a baby cost? The answer depends on many factors. Does one parent stay at home or does the family hire a child care provider? Will the child attend public or private school? Is there a need for a larger home or car for the growing clan? Raising a child costs an average of nearly $11,000 the first year and more than $220,000 for the first 18 years, according to the U.S. Department of Agriculture.

So where do expecting and new parents start? Thrivent Financial for Lutherans offers these five “baby steps” to help them prepare.

1. Start early. During your pregnancy, take the time to determine your family’s immediate financial needs as well as your long-term goals.

2. Create a realistic budget. Determine the true cost of what you will need and weigh it against the new realities of your household income situation. This is particularly important if you plan on leaving the workforce for an extended period of time. Consult another new parent for a list of monthly baby expenses to get a clear picture of those costs.

3. Start and/or increase an emergency fund. The chances of unexpected expenses will become much greater once the little one comes on the scene.

4. Get protection through proper insurance. It’s time to face your own mortality and vulnerability. Protection is critical. Consult with a financial representative to insure your health, property, income and life through appropriate insurance. In addition, consider a juvenile life insurance policy when your child is born. Also, be sure to update the beneficiary designation on your own policies once the baby is born.

“For new parents, one of the biggest financial priorities we hear about is their desire to protect their family’s financial future,” says Bruce Fear, vice president of protection products and solutions for Thrivent Financial. “The foundation of this protection starts with having the proper insurance in place in case of an unexpected event. This can provide some peace of mind to many parents.”

5. Save for college. Before you know it your child will leave the nest, so start saving for junior’s college experience now. A financial professional can assist with the various investment tools available today for college savings. Furthermore, opening a savings account in the child’s name is a great starting point for depositing monetary gifts given to the child.

Supporting a family is hard work. Having the knowledge and tools you need to help ensure your financial stability will make the journey less complicated and even more rewarding.

“Figuring out what tax breaks are available, whether you qualify, and what forms you need can be tricky,” says Jessi Dolmage of TaxACT, makers of tax preparation software. Dolmage offers some tips for taking advantage of commonly missed deductions and credits:

* If you paid for child care in 2010, you may be eligible for the Child and Dependent Care Credit. Day care, pre-kindergarten, before-school and after-school programs and summer day camp for children 13 or younger qualify. The care must have been provided so that you, and your spouse, if filing jointly, could work or look for work (exceptions apply for full-time students and the disabled).

The credit amount varies based on filing status and adjusted gross income, but the maximum benefit is 35 percent of expenses for joint filers with an adjusted gross income of $15,000. Eligible expenses are reduced by dependent care benefits provided by your employer that you deduct or exclude from your income. Payment for care cannot be paid to a spouse, a dependent on your return, or to a child who will not be age 19 or older by the end of the year even if he or she is not your dependent; thus, care provider(s) must be identified on your return.

* 2010 is the last year to claim the Nonbusiness Energy Credit, worth up to 30 percent of the costs for many energy-efficient home improvements. Up to $1,500 for 2009 and 2010 combined can be claimed, but only for the year during which the improvements were made. Other green improvements like solar hot water property, geothermal heat pumps and wind energy property may qualify for the Residential Energy Efficient Property Credit.

* If you travel in order to provide services at charitable events, you may be able to take a miscellaneous deduction. Deductible expenses include transportation costs, out-of-pocket expenses for your car, taxi fares or other costs of transportation between the airport or station, and your hotel, lodging and meals. The trip should include little to no personal recreation or vacation. Be sure to keep receipts and detailed documentation.

* Be rewarded for contributing to your employer-sponsored retirement plan or an individual retirement arrangement (IRA). The Retirement Savings Contributions Credit is worth up to $1,000 for taxpayers born before Jan. 2, 1992 ($2,000 for joint filers). The non-refundable credit is a percentage of the qualifying contribution amount minus distribution amounts, with the highest rates given to lower incomes.

* If you spent money looking for a job in the same field during 2010, you may qualify for a miscellaneous deduction. Employment agency fees, resume printing and postage costs and travel to and from the area (if the travel was primarily to look for a new job) are eligible. You aren’t eligible if you’re looking for your first job or there was substantial time between the end of your last job and the time you looked for a new one.

“Affordable, do-it-yourself tax software and online solutions make getting all your credits and deductions easy and fast,” Dolmage says. “The program walks you through each credit and deduction, and completes the necessary forms. Solutions like TaxACT also guarantee your biggest refund and make getting every credit and deduction you deserve easy.”

Details about these and other 2010 tax breaks can be found at www.irs.gov. TaxACT Free Federal Edition, available at www.taxact.com, guides you through these tax benefits, and allows you to prepare, print and e-file your federal return free.