Search results matching tag 'credit'

Card companies roll out ‘friendlier’ cards

Karen Datko — Wed, 23 Sep 2009 16:00:00 GMT

Zut alors! Credit card companies are beginning to offer simpler, more consumer-friendly credit cards to the masses.

For instance, Bank of America's Basic Visa card, which debuts next month, will charge the same interest rate no matter how you use the card. It also comes with a set $39 late fee that won't fluctuate regardless of how large your outstanding balance is.

Also, Jack at Master Your Card said, the interest rate won't go up even if you make a late payment.

Even better, it seems, is Chase's new Blueprint feature, newly available for some 20 million existing credit card accounts. Blueprint allows cardholders to single out certain types of purchases -- say, groceries or gas -- that they can pay in full each month interest-free while finance charges accumulate on the rest of the balance.

Why are card companies trying to make things easier for us? In part, they're trying to get ahead of the curve before new credit card rules kick in. The Washington Post offered another possible explanation:

Credit card experts said card issuers are clearly trying to improve their images after months of defending themselves for raising interest rates and cutting credit lines for even their most creditworthy customers.

We like the added transparency of these new features. One interest rate? That will eliminate the surprise you get when you open your bill after using the card for cash advances.

Blueprint -- which is free and optional -- has several attractive features. You can tell Chase when you want to pay off a particular purchase or your entire balance, and it will produce a payment plan to fit your goal and allow you to review your progress online. You can also use Blueprint to set a budget and track your spending. Sounds like a good tool.

Bing: More about Chase Blueprint

What do other personal-finance bloggers think?

Re Basic Visa: Several noted that this card comes with a hefty interest rate -- the prime rate plus 14%.

Re Blueprint: "The whole thing feels very Mint-y and Thrive-y -- which means this could be pretty cool," Jack at Master Your Card wrote.

However, he wondered if the "full pay" feature for groceries and such really saves you money, and answered:

No, not really -- you aren't saving anything if you think about it. The deal is that you pay no interest on a certain category provided that you pay it off in full. This holds true for any kind of balance you hold on your credit card -- Blueprint or no. ... What Blueprint does is help you track spending in a certain category. It's about self-awareness.

David Weliver at Money Under 30 reviewed Blueprint and praised the transparency, which, he said, will allow card users to make better decisions about using credit. But, he added,

Does Blueprint make it "smart" or "OK" to borrow on a credit card? Hardly. The best policy is to pay your card in full every month. And for those determined to get into credit card debt, a Chase Blueprint card might be the credit equivalent of a "light" cigarette; they'll both still kill you in the end.

Related reading:

Pay your bill, get a reward

Would a credit card balance transfer help?

Credit card rates, fees soar as new law looms

Cash is not king

Karen Datko — Tue, 22 Sep 2009 21:56:00 GMT

This guest post comes from Frank Curmudgeon at Bad Money Advice.

I still don't get the debit card thing. But according to The Wall Street Journal, there is a new trend I do understand: establishments accepting cards but not cash.

Slips of paper and metal disks are an inefficient and archaic form of money. You have to go to an ATM to get some, and often pay a fee. To use it, you have to wait for the clerk to make change. You have to carry it around. And then there is the growing pile of coins most of us have at home.

And don't get me started on parking meters. Offering me a nice parking space for half an hour in exchange for a quarter, and only in exchange for a quarter, is more scavenger hunt than transaction.

Bing: Parking meters that take credit cards

Plastic pushing out paper has been a long brewing trend. I can remember when grocery stores didn't take cards. I still feel a little funny charging things there. Today we take for granted that we can use plastic just about anywhere, even in places, like taxicabs, that a generation ago would have seemed implausible as potential users of cards.

It's now actually hard to think of cash-only places. Most parking meters. My favorite burger joint in Cambridge, Mass. The vendors who work the grandstands at Fenway (although the concession stands and the waitresses in the premium seats take cards). I'm hoping the hot dog guys hold out for a while longer. There is something reassuringly nostalgic about passing the dogs down the row, the money in the other direction, and then the change back.

From the merchant's point of view, taking cards costs a small percentage of the bill, but that's a tradeoff most of them made their peace with long ago. Making it easier and more convenient for customers to spend money is good for business.

And cash is not without its costs to the business owner. There's the cost of paying a cashier to make change. And there is the unfortunate tendency of some of your employees to slip a little bit of it into their pockets.

(If you think about it, a lot of the way stores are traditionally arranged is to make it hard for employees to steal cash. Having a few centralized cash registers is an obvious example. And charging $14.95 instead of $15 has more than a psychological appeal. It forces the salesperson to go to the register to make change.)

Not only is cash not costless for the merchant, it gets proportionally more expensive as fewer customers use it. There is an unavoidable overhead to maintaining a cash register full of small denominations to make change. As the customers paying the old-school way become a dwindling minority, that register starts to look like an expensive convenience that benefits a small number of people.

Which is, I suspect, what inspired the establishment in the WSJ article to go all-plastic. The restaurant, ironically (appropriately?) called Commerce, found that "more than 90% of customers had already made the switch to plastic." Given that this is the sort of place where a plate of spaghetti costs $23, I'm betting that proportion was significantly higher than 90%.

And in case you are wondering, it is perfectly legal for a business not to accept cash, provided they state this in advance. It's a free country and you can agree to whatever terms of payment in your contracts you like.

About the only argument I can think of in favor of cash is that it does not leave a paper trail. But I am suspicious of those who think not generating a record of their transactions is important. As the WSJ quoted the blog Eater (but rudely did not link to) this is "bad news for mobsters, drug dealers and the Real Housewives of New Jersey."

Related reading at Bad Money Advice:

When to start collecting Social Security

How money gets wasted

Credit cards and our nation of children

Who walks away from mortgages?

Teresa Mears — Tue, 22 Sep 2009 20:19:00 GMT

Conventional wisdom would seem to dictate that someone with an excellent credit score is less likely to walk away from a mortgage than someone with poor credit.

That's not so, syndicated real estate columnist Kenneth Harney writes in a story The Washington Post headlined "Good credit scores, deadbeat choices." In fact, people with excellent credit scores are 50% more likely to "strategically default" on their mortgages -- intentionally walk away -- than are lower scoring borrowers, according to a study by credit bureau Experian and consulting firm Oliver Wyman.

Harney reported these findings from the study:

Strategic defaulters often go straight from perfect payment histories to making no mortgage payments at all.
Strategic defaults are heavily concentrated in where home values have plummeted in recent years, such as California and Florida.
Homeowners with large mortgage balances generally are more likely to pull the plug than those with lower balances.
People with credit ratings in the two highest categories are far more likely to default strategically than people in lower score categories.

Harney interviewed Piyush Tantia, a principal researcher on the study, who said the homeowners with high credit scores appear to see walking away as the most practical alternative under the circumstances.

The column doesn't discuss the merits of a short sale vs. giving the lender a deed in lieu of foreclosure vs. letting the house go into foreclosure. Nor does it explore why people with excellent credit are more likely to walk away than those with poor credit.

Bing: Help for homeowners facing foreclosure

Mike "Mish" Shedlock at Mish's Global Economic Trend Analysis has some ideas.

"The only ‘asset' many subprime borrowers have is their home,'' he wrote. "Although that asset has negative value, the homeowner may have nowhere else to go, especially if they have to put up a month's rent plus a 1-2 month security deposit in advance to rent."

In contrast, the high-scoring homeowners may have other assets and less emotional attachment to the home, plus can more easily rent another home.

"Also note the psychological factor about 'losing the only thing I ever had' for the buyers with lower credit scores," he writes.

MyBudget 360 notes that more strategic defaults are ahead in housing bubble states as option ARMs, adjustable rate and interest-only mortgages reset, confronting homeowners with higher payments on homes that aren't worth the mortgage balance.

"And you can put yourself in the shoes of someone who bought a home at the peak. Say you and your spouse bought a home in a bubble market for $500,000. Deep down, both of you felt that housing would never go down. This view was widespread. You saw for nearly 5 years homes appreciate by 10, 15, and 20 percent per year. At the very worst, you would be able to sell your home for $600,000 or $700,000 in a few years when your loan recast.

"Well, your home is now worth $250,000. It may never regain that peak value. Your payment will jump from $1,500 to $3,000. You can rent a similar place for $1,300. What do you do? Many are simply electing to walk away. In a state like California with 12.2 percent unemployment this decision might be made also by necessity. Sure, they can make the payment but how much of their budget is it eating up?"

Mark Gimein at Chumpchanger believes that walking away in that situation is absolutely the right thing to do

"In story after story about the foreclosure crisis, you will find the implicit idea that borrowers who can afford to pay their mortgage should keep on paying it no matter how much their house sinks in value because they have made a promise to pay and to do otherwise would be an abuse of the system," he writes.

"Propagating this idea is good for lenders and probably good for taxpayers, but basically, it's nonsense."

Liz Pulliam Weston notes that the decision about whether to walk away is only a moral issue if you have a choice. And she offers three key questions to ask when deciding whether to hold on to your house.

What's your take? Is it always wrong to walk away from a mortgage, even if continuing to pay will deplete your savings? What if it depletes your retirement funds as well? What if you lose your job and can only pay by running up credit card debt? What if you're divorcing or a spouse has died? Should someone continue to pay a $500,000 mortgage on a home that's now worth $250,000? Or are there times when walking away (or doing a short sale) is really the best financial decision?

And what does the fact that people with the very highest credit scores are more likely to walk away say about the credit scoring system? Or are they just showing that they are, as their scores indicate, prudent when it comes to money?

Related reading:

Subprime debt's new threat to housing

Options if you're facing foreclosure

Where homeowners can find help

YouTube credit card rebel gets results

Teresa Mears — Mon, 21 Sep 2009 20:33:00 GMT

Ann Minch, the California woman who took her fight over a credit card rate increase to YouTube, apparently has extracted the concession she sought from Bank of America.

In a new video posted Saturday, she said Bank of America had agreed to return the interest rate on her $5,943.34 balance, which had been hiked to 30%, to 12.99%. The bank's first offer was 16.99%, which she said she rejected.

She said she was contacted by Jeff Crawford, senior vice president of existing credit card accounts, who was polite. He didn't mention either her video or her "taxpayers' revolt" -- which she says is not over.

Minch's first YouTube video, which has circulated widely on the Internet, has been viewed more than 241,000 times.

Arthur Delaney, the Huffington Post blogger who catapulted Minch into the limelight when he shared her story last week, also was the first to report that Minch and Bank of America had reached an agreement. He quoted a Bank of America spokeswoman, who confirmed that the bank had contacted Minch and, "based on additional information we received about her situation, we reached a mutually agreeable resolution."

Minch's case generated thousands of comments from our readers, some supporting her and others saying that her problems were her own fault.

Many readers said they also had had their credit card rates raised substantially, even though they had made all their payments on time. Bankrate.com and Business Week wrote last year about Bank of America doubling rates for cardholders with good credit.

New rules that went into effect Aug. 20 require card companies who raise your interest rate or otherwise change the terms to tell you that you can cancel the card and pay off the balance at your old rate over five years. But, your minimum payment may rise.

Bing: More on the new credit card law

The new rules are long overdue, according to a reader calling himself Anon E. Mouse: "Where else can you have a contractual agreement that one party can just decide that they no longer wish to be held to, so they just change it regardless of what the other party wishes (besides professional sports), while legally holding the other party to the NEW terms, and the other party has NO RECOURSE???"

But a reader known as Captain Falcon believes Minch brought her problems upon herself, and she should pay up: "The sense of entitlement people in this country have truly baffles me. She racked up thousands in debt and is basically acting in delinquency and some people agree with it?! I'm no pro-business neo-con but people need to stop saddling the card companies, lenders and banks with 100% of the blame and show some responsibility. I'm sick of people, even friends of mine, make stupid decisions then try to blame the bank for their problems. Maybe a 30% rate will teach this lady to abstain from frivolous materialism and show some restraint!"

Reader Mick thinks both sides are wrong: "It is the fault of regulators for allowing banks and CC companies to change rules in the middle of the game. The run-up in interest rates to obscene levels of 30% and more amounts to usury. Some relief may be coming next year but you can bet your bottom dollar that the CC issuers will get all they can before the rules change. As for the woman who is refusing to pay up, she spent the money and her refusal to pay just puts the burden on other cardholders in the form of even higher interest rates. She needs to find a way to pay her debts. Nobody held a gun to her head and made her use the card."

ME Simpson agreed: "What Ann has finally discovered is that credit card companies are natural predators. Carrying a credit card is like being in a cage with a lion. But, that doesn't mean you have to stick your head in its mouth."

What the new credit card law means for you

Credit card rates, fees marching up

Is your credit card issuer unfair?

Card companies focus on the wealthy

Karen Datko — Thu, 10 Sep 2009 18:50:00 GMT

This post comes from James Limbach at partner site ConsumerAffairs.com.

If you're an affluent American, chances are you've seen more offers of MasterCard World or Visa Signature -- the so-called premium credit cards -- in your mailbox recently.

Mintel Comperemedia, a provider of direct-marketing information, reports that credit card issuers are advertising more premium cards in an effort to attract the best customers.

In the second quarter of this year, credit card issuers sent 28% more marketing direct-mail offers for premium cards than they did the quarter before. This occurred even as issuers reduced credit card offers as a whole by 8%.

Even more, credit card companies have sent a steady number of premium card offers since early 2008 while slashing direct mail for general cards. In the first half of 2009, premium cards accounted for 19% of mail campaigns tracked by Mintel, compared with just 9% in the first half of last year.

"Credit card companies are competing to attract people with high credit scores and big spending habits," said Andrew Davidson, senior vice president of Mintel. "Because premium credit cards often have high associated fees and low risk, issuers see them as an excellent way to restore profitability in today's economy."

Credit card issuers are also competing by introducing new premium cards. High-profile cards launched since the beginning of the downturn include Chase Sapphire, the Visa Black Card and the American Express Hilton Honors Surpass Card.

Mintel's Davidson sees the focus on premium cards as positive. "Credit card issuers are beginning to expand with more credit and products for the affluent," he said. "It won't be long before this trickles down and we start seeing greater credit card marketing to all consumers."

Related reading at ConsumerAffairs.com:

August foreclosures up 18% over 2008

Small businesses would benefit from health reform, study finds

Is it time to buy yet?

Customers less satisfied with credit cards

Karen Datko — Thu, 03 Sep 2009 22:21:00 GMT

This post comes from James Limbach at partner site ConsumerAffairs.com.

Are you happy with your credit card? If not, you have a lot of company.

Driven by a significant decrease in satisfaction with fees and rates, overall credit card customer satisfaction declined to a three-year low, according to the J.D. Power and Associates 2009 Credit Card Satisfaction Study.

The study finds that overall credit card customer satisfaction fell to 703 on a 1,000-point scale -- the lowest level since the study's inception in 2007. Overall satisfaction among credit card customers remains the lowest among the financial services industries in which J.D. Power and Associates conducts research, including insurance, banking and investment services.

The study measures customer satisfaction with credit cards by examining six key factors: interaction; fees and rates; billing and payment process; rewards; benefits and services; and problem resolution. Satisfaction with fees and rates dropped to 603 points -- down 37 points from 2008 -- contributing considerably to the decrease in overall satisfaction.

Nearly 20% of customers reported an increase in their interest rate since 2008, almost double the 10% who said the same in 2008. The largest decline in satisfaction with fees and rates was among "revolvers" -- customers who carry a balance from month to month -- a drop of 53 index points from 2008.

American Express ranked highest among credit card issuers for a third consecutive year with an index score of 762. AmEx performed particularly well in the rewards, benefits and services, and billing and payment process factors. Discover (751) and National City (740) followed AmEx in the rankings.

Related reading at ConsumerAffairs.com:

Wal-Mart employees going checkless

Free checking isn't always free

Car buyers are thinking American

Fixing credit report errors

Karen Datko — Tue, 01 Sep 2009 13:39:00 GMT

This post comes from Jim Wang at partner blog Bargaineering.

A few years ago I had a little credit report error incident. I had just started a new job and was going through a background investigation, which included a review of my credit history. In the course of that review, the investigator noticed that there was an address listed on the report that I hadn't previously disclosed.

The reason I never mentioned the address is because it wasn't mine.

When he told me, I feared the worst. I thought I was joining the millions of people who have their identity stolen each year. In fact, just a year before that, a friend was telling me how it took him several months to get his identity recovered and even then everything credit-related was a pain.

So my mind immediately jumped to ID theft.

Fortunately, it was an isolated, albeit strange, credit report error that was relatively easy to resolve. The error was the addition of an address, a Social Security number (that differed from my SSN by one digit), and a telephone/cable package. I went through the usual protocols of disputing the information, thinking the onus was on the other party to prove the information was true. But I was wrong.

If you want a copy of your credit report, you can request one from each of the three credit bureaus every 12 months by visiting AnnualCreditReport.com. It is the only place where you can get a no-strings-attached free copy of your report from each bureau. No credit score is provided. For that you'll need to use free credit report offers.

Fixing personal information errors

Because the error dealt with personal information, I had to prove I never lived at that address. To prove I never lived there, I had to provide two bills, bank statements, or credit card statements showing an address for the preceding six months. To prove the telephone wasn't mine, I had to provide a bill for phone service with a permanent address matching the other documents.

It ended up being 50 pages worth of documents, and I had a grand time blacking out sensitive information and faxing that monster over to the credit bureau.

Finally, I had to fax a copy of my Social Security card to prove the other number wasn't mine.

It was a simple error to fix but one that should never have happened. I thought the SSN had to be unique to the credit report, but they're not. They usually are, except in rare cases where there is a data-entry error and somehow a second SSN gets added. I don't know what genius created the software that doesn't check for that, but I'm not surprised: Credit bureaus work for lenders, not borrowers. (Then again, as a lender, I'd never lend a penny to someone with two SSNs.)

Fixing account information errors

Account information errors are a little easier to fix because the onus is on the institution that reported the account in the first place. An example of an account information error is if they have someone else's account history listed on your report or a late payment listed when you never paid anything late.

If it's a minor error, I would just go with the bureaus' reporting mechanism to get it resolved. If it's a more serious matter, I recommend following the process outlined by Bob Sullivan at The Red Tape Chronicles. In the case of erroneous bankruptcies or other serious errors, it makes more sense to take a more rigorous, no-nonsense approach to fixing credit report errors. While the responsibility for proving the information is on the furnisher, that doesn't mean the bureau's going to spend all that much time trying to resolve it.

Fixing credit report errors is a necessary evil. I'm far more cautious and careful with my personal information after having gone through that experience. You can't protect yourself from everything and you do what you can, so it's important to know what you should do next if you find errors on your credit report.

Related reading at Bargaineering:

Best cash-back credit cards

How to increase your credit limit

How to win the lottery

Card companies penalize good customers

Karen Datko — Thu, 27 Aug 2009 22:01:00 GMT

You know what people always say when they complain that the credit card company slashed their credit limit: I've never missed a payment or been late.

Quite likely, a new study shows, they aren't lying.

The study by FICO, originators of the FICO credit score, found that of the 33 million people whose credit limits were reduced between October and April, 24 million had no new marks against them in their credit reports that would prompt a card issuer to tighten the reins.

Also, reports Pamela Yip of The Dallas Morning News, "Those cardholders generally had low balances, didn't use up a lot of their available credit, had very few -- if any -- reports of missed payments, and had a long credit history."

In fact, the median credit score of these responsible folks was a very decent 760, said Washington Post columnist Michelle Singletary, who also explains what happens if you get mad at the card company and close your account.

The remaining 9 million or so whose credit limits were reduced had done something like make a late payment -- the kind of stuff we're told we should never do if we want to maintain a stellar credit score.

What happened to consumers' credit scores after credit limits were reduced? We already know that if the amount you owe on your cards each month is close to your credit limit, that's going to hurt your score. To find out specifics, FICO examined the impact on the credit scores of the blameless 24 million.

Scores dropped for 8.5 million people, generally "well under" 20 points, FICO said.
Scores remained pretty much the same for 3.5 million.
Scores rose for 12 million.

How could that be? Even though the average credit reduction was $5,100, that represented only 14% of the average total revolving credit of these folks. In other words, they had credit to spare.

So why did the credit card issuers penalize responsible people (and a lower credit limit is only one of the ways credit card companies have shanghaied customers in the last year)? A statement by FICO CEO Mark Greene sheds some light on the answer: "Our study suggests that lenders are using a scalpel and not a hatchet to trim their revolving credit exposure and meet their requirements for regulatory capital."

The next time you call the card company to ask why your credit was reduced or your minimum payment was raised, rather than telling you it's because of something in your credit report, the customer service rep should simply say, "Because we can."

Related reading:

Credit card holders unduly whacked?

New credit card rules kick in

Weird stuff that hurts your credit

Perfect credit? You don't need it

11 steps to improve your credit score

Karen Datko — Fri, 21 Aug 2009 13:16:00 GMT

This post comes from partner blog The Dough Roller:

Improving your FICO credit score has never been more important than it is now. Your credit score affects whether you are approved for a loan, the interest rate your pay, and even the cost of insurance. Credit card companies now use credit scores and credit history to determine not only the interest rate that will apply to the account, but other terms such as the length of no-interest balance transfers. And your credit score can even impact whether you get a job.

In short, your credit score has a big impact on your finances. The good news is that you can begin to improve your credit score today with a few simple steps. I've been monitoring my FICO credit score through myFICO.com, and I've noticed that my score has gone up about 15 points in the last month. So I thought it was a good time to review the simple steps we all can take to increase our credit scores.

(The definitive guide to credit scores is Liz Pulliam Weston's "Your Credit Score, Your Money & What's at Stake." Much of what I've learned about my own credit score comes from this book, and I highly recommend it.)

Get your FICO credit score. The first step is to know your credit score. The saying goes that you "can't improve what you can't measure," and that's never more true than with your finances. The good news is that you can get your FICO credit score for free directly from the creator of the FICO score. You do have to sign up for a 30-day trial of Credit Watch, but you can easily cancel the service before the trial ends if you want. I continued my subscription of Credit Watch specifically to monitor my score and have been happy with the service thus far.

Get a free copy of your credit report. Step 2 is to get a free copy of your credit report. By federal law, the three major credit-reporting agencies must provide each consumer with a free copy of their credit report every year. This is the starting point for improving your score. And remember, you can get your free copy at AnnualCreditReport.com.

Review your credit report for transactions that aren't yours (yes, identity theft). The first thing to do when reviewing your credit report is to make sure the identifying information about you is accurate and that your open accounts actually belong to you. It may be that your score has been knocked down because somebody is using your identity to apply for credit.

Review your credit report for errors. Even if all of the reported accounts belong to you, they may contain errors. For example, a creditor may have reported a delinquent payment (late payment or charge-off) that was in fact paid on time or repaid. If you paid a creditor in full after some missed payments, it's not unusual for the creditor to have failed to report your payment to the credit bureaus.

Review your inquiries for errors. When you apply for most types of credit, the creditor will pull your credit report as part of its decision whether to extend credit and on what terms. These inquiries are one factor in determining your credit score. The theory goes that if you have a lot of recent inquires to your credit report, you may be applying for credit to address a financial crisis. As a result, inquiries will lower your credit score. What you want to make sure is that you authorized each of the inquiries that you find in your credit report.

Dispute any errors you find. After carefully reviewing your credit report, your next step is to dispute any errors you find. Having successfully disputed errors in the past, I suggest taking two approaches. First, contact the creditor directly to dispute the error. Particularly if you still have an ongoing relationship with the creditor, they generally are willing to look into the issue. Second, dispute the error directly with the credit-reporting agency. By law they are required to investigate any errors you bring to their attention and respond to you within 30 days.

Filing a dispute with a credit bureau is much easier than it may seem, and each of the three major credit-reporting agencies has a section of its Web site (Experian, TransUnion and Equifax) that will help you dispute an error online.

Pay your bills on time. After you've examined your credit report closely and disputed any errors, it's now time to turn our attention to money management. And the first rule of credit score health is to pay your bills on time. Even one late payment can significantly lower your credit score, and that's even more true the higher your score is to begin with. Note that most creditors will not report a late payment until it's 30 days past due. Still, being even one day late can result in penalty fees, increased interest rates, and even closed accounts.

Pay down your debt. This may fall into the "easier said than done" category, but it will help improve your credit score. Overall debt and the amount of available credit are important factors in calculating a FICO credit score. So paying down debt over time will help. As a starting point, avoid incurring any new revolving debt while you continue to make payments on the debt you have.

Do NOT close revolving accounts. It may seem counterintuitive, but closing credit card accounts, lines of credit, and other revolving debt can actually lower your credit score. One of the factors affecting your credit score is the amount of debt you have compared with the amount of available credit. The more available credit you have, all other things being equal, the higher your credit score. You can always cut up or put away credit cards to avoid using them, but don't close the accounts.

Don't max out a credit card or line of credit. Another factor in the credit score formula is whether you use most or all of the available credit in any given account. The theory is that if you max out an account, it may reflect some financial difficulties that could increase your risk of default. And this is true even if you pay off the account in full every month.

Apply for new credit only if you must. As noted earlier, inquiries to your credit report will lower your score. Every time you apply for a credit card, line of credit, or other loan, an inquiry is made to your credit report. To avoid these inquiries, apply for new credit only if you must.

Improving your credit score can have many positive effects on your finances. The simple steps described above will help you improve your score, and you may see results very quickly. Of course, if you are recovering from a financial meltdown, it will take time. But with patience and sound financial management, you should see your score start to improve.

If you have other tips on how to improve your FICO credit score, please share them in the comments below.

Related reading at The Dough Roller:

Online discount brokers

Can you build credit with a prepaid card?

How to find affordable health insurance online

New credit card rules kick in

Karen Datko — Wed, 19 Aug 2009 16:22:00 GMT

A few provisions of the credit card reform or CARD Act take effect on Thursday, Aug. 20. You'll have to wait until next year for more substantive changes to the way credit card companies operate.

We're referring, of course, to major changes to federal laws and regulations governing credit cards, which won't kick in until February and next August. Because the fact is that credit card companies responded quickly to the passage of the CARD Act by:

Increasing minimum payments and interest rates.
Charging annual fees.
Raising late fees and balance-transfer fees.
Reducing rewards.
Slashing credit limits.
Changing fixed-rate cards to variable-rate cards.
Shrinking grace periods.
Flat-out canceling cards.

Whew! Did we leave anything out? In other words, they're trying to squeeze every drop of blood they can from customers before the government restricts their ability to do that. (To see how widespread these activities are, read "Credit card holders unduly whacked?")

Here are the legal changes you can expect right now:

Card companies must give consumers 45 days' written notice before increasing interest rates or changing other terms. That's 30 more days than many consumers have been getting, but it doesn't apply when the company is lowering your credit limit or canceling your card. Also, Kara McGuire of StarTribune.com reports:

If you make any purchases 14 days after you've received notice of an interest rate change, those purchases will be charged at the higher interest rate. So don't go on a charging spree thinking you're sneaking in under the wire.

If they're changing the terms, they have to explain in that same notice that you can cancel the card and pay off the balance at your old rate over five years. (However, Kara warns, your minimum payment may go up, and closing an account that has a large balance can damage your credit score.)
Card companies must mail or otherwise deliver a statement at least 21 days before it's due. That's an improvement over the current 14 days.

Big changes coming next year include limits on interest rate hikes and over-limit fees. For more about that, read this.

Why did Congress and President Obama give the card companies so much time to adjust to the new rules? The delay has been very costly to consumers.

Card companies said they needed time to prepare. But others don't buy it. "If credit card issuers need to make a change to increase the (annual percentage rate) or increase a fee, or anything that benefits them, they can do that very, very quickly, so I don't know why the government gave them so much time to make those changes," Bill Hardekopf, chief executive of LowCards.com, told McClatchy Newspapers.

Related reading:

Surprise! Your card's no good

Fixed-rate credit cards ‘a dying breed'?

Chase raises minimum payments on credit cards

Banks have declared war -- on you