1) retroactive rate increases;
2) card charges for pay-by-phone payments unless it is 60 days overdue; and
3) double-cycle billing or the imposition of card charges for previous and current balances.

Despite this new rule, however, cardholders must continue to be cautious about their credit card habits. This is because just as banks are starting to control their abusive practices, other modes of collecting hidden charges from cardholders will surely spring up that can hurt consumers just as before. Therefore, it is always wise to exercise utmost vigilance in the use of credit cards.

The following are the most common credit card pitfalls credit card users should watch out for.

1.) Cash Advance Interest Charges – As much as you can, avoid making cash advances from your credit card. The interest rate for cash advances is often several points higher than the normal purchase interest rate (the rate that is associated with everyday card purchases). Cash advance rates normally range from 20% to 25%. In contrast, the average purchase rate for a standard credit card ranges from 15.88% to 17.30%.

2.) Late Payment Charges – Late payments can charge you with as high an interest rate as 27%. Yes, more and more companies are earning more from late fee income than ever before due in part to this sharp hike in late fee (more than doubled between 1992 and 2000). Not only that, credit card companies have also decreased the time between when they mail your credit card statement and when payment is due, and about 66% of these companies have totally eliminated grace periods or don’t have one at all, between the payment’s due date and the date a late fee is assessed. In the past year, 13% of Americans have been 30 days late paying credit card bills.

3.) Higher Over Limit Charges - A typical credit card purchase ends up costing 112 percent more than if cash were used. Credit card companies are taking advantage of the American’s tendency towards out of control spending. If you exceeded your limit by as little as $1, many companies will charge you with as high as a $40 over-the-limit fee.

4.) Lower Minimum Payments – Low minimum monthly payments are considered dangerous traps as they encourage consumers to pay higher finance charges over an extended period of time. More and more companies have decreased minimum payments from 5% to the current standard of 2% or 3% to attract low-income consumers.

5.) The Many Faces of APRs – Beware of the seemingly low Annual Percentage Rates (APRs) that actually increase your debt. Currently, 57% of card offers are advertised at low introductory APRs. These APRs run on the average of 4.13% and last an average of 6.8 month. A consumer is drawn to this offer because normally a higher APR triggers a more expensive loan as you pay off credit cards in gradual installments. However, credit card companies do not clearly divulge that these short-term introductory APR’s are used to hide actual APRs that are an average of 264% higher.

There are other lures such as “Fixed” APR. However, despite the term, these APRs can increase with as little as 15 days notice to cardholders.

Hidden Transaction Fees – Interest rates from convenience checks and balance transfers are usually higher than interest rates for normal credit card purchases. Even pay-by-phone and charging on foreign countries have corresponding higher fee charges. It may be stated in the credit card notice that collecting minimum fees may guarantee the credit card companies higher fee income regardless of the transaction amount but cardholders easily miss them in long and very tiny print in the terms and conditions. Lost in the fine print as well is the stipulation that if the applicant is not qualified for a premium card, the credit card company can substitute a lower-grade, non-premium card which in fact is more expensive and has less flexible terms.

Should you or shouldn’t you?

Why Stores Offer Store Credit

Stores usually offer store credit cards because they want to build customer loyalty and keep track of their customers’ buying habits.  It’s a profitable business for them, too, due to the interest payments of store customers.  Furthermore, store credit cards save the stores money; when stores accommodate payments using other credit cards – say, Visa-MasterCard payments – they pay merchant fees.  Usually, such fees amount to 2% of every transaction, costing shops up to $26 billion yearly.  If they offer cards co-branded with Visa or MasterCard, they will save some money in fees, but they still have to pay some merchant fees.  But if they offer their own cards, they avoid the fees entirely.

Benefits of Store Credit

If you’re a frequent customer of a specific store, getting a credit card from this store is probably a good move.  It will put extra savings in your pockets as most store credit cards come with rewards of various sorts including cash rebates, sales price discounts and shopping points.  You must, however, inquire if the discount or reward is granted immediately, can be redeemed anytime or has no applicable restrictions and conditions and if there are strings to reward/discount redemption.  Answer all these questions before you decide to take up store credit offers.

Store credit accounts, moreover, sometimes have more lenient payment terms.  Some stores can also be more forgiving of late payments – or at the very least, may have lower late penalties and delinquency interest rates.  Thus, if most of your credit card purchases are for a specific store that has its own in-store credit program with lenient terms and low interest rates and penalties, then it would be practical to take up a credit offer from this store.

Owning a store credit card will likewise help you build credit.  If you spend on a budget and pay all of your bills religiously, a store credit card is definitely a good credit plus financial planning tool.

Drawbacks of Store Credit

Check the rules.  As with applying for any type of credit card or loan, you need to read the terms and conditions attached to the credit line or offer.  Take time to understand the clauses on default terms, fees, interest, and penalties.  High interest rates may await delinquent card holders so you should know how much you will be charged – and how you will be penalized – if ever you’re late on a payment.

A store credit card opens another avenue of credit.  Thus, it can make spending – or splurging – easy for one who tends to be financially irresponsible.  There is a high utilization percentage of store credit cards – even by the most modest shopper!

Furthermore, having three or more store cards open at one and the same time can put a dent in your credit score.  It will largely affect your debt-to-credit ratio.

After knowing the pros and cons of owning one, the ultimate decision lies in you.  Store credit cards are obviously assets to stores.  Don’t allow them to get all the benefits.  If you scratch their back, let them scratch yours!  Think twice!  Decide depending on your own financial and shopping habits.  Grab one if will it be an asset yet drop it if it will or if it has become a liability.

“What’s in your wallet?”
“There are some things money can’t buy.  For everything else, there’s MasterCard.”
“It’s Everywhere You Want to Be.”

Yes you guessed right, these are the ad slogans of leading credit card companies.  Swipe here, swipe there; swipe it anywhere!  It is convenient to have credit cards but gruesome to pay accrued credit card bills.  The result:  bad credit.  If your credit is ruined, how do you repair it?

Ways to Repair your Credit

You messed up your credit, you can fix it yourself!  There is nothing that a professional debt consolidation company can do that you can’t.  You don’t have to be a genius to be able to mend it.

The first thing that you need to do is know what you actually need to repair.  How?  Get free credit reports from the three credit bureaus:  Equifax, TransUnion and Experian.  Get all three because your report on each one may vary.  Not all of your credit transactions are reported in one bureau.  Have a clear picture of your credit history.

Upon furnishing yourself with copies of the reports, review them.  Chances are, there’s at least one mistake in each report.  This happens because the bureaus no longer double-check the reports submitted by creditors.  Inaccurate information is easy to fix (albeit it can be tedious and time consuming), but the legitimate negative ones are the real challenges.

If you aren’t fond of late payments, start a new habit.  Pay on time!  Avoid applying for loans as if there’s no tomorrow.  Design your own financial plan.  If you have past due accounts, make them “current” or get them paid.  Request for restructuring of credit, e.g. reduced monthly payments, altered due dates or extended repayment schedule.  This will allow you to stay “current” and save your rating.  The rule of thumb is to keep your revolving debt to 50%, max, of your available credit.  Whatever new agreement you may come up with, be sure it’s in writing.

For inactive credit accounts, close them slowly.  It’s tasking to maintain a number of credit lines.  Be cautious though because closing may likewise negatively impact your credit score.   Make sure these closed accounts are labeled “closed by customer” to ensure a good report.  Open savings account so future creditors will think you have reserves to settle your dues.

Past delinquencies will definitely affect your future credit applications but keep trying.  Apply with only one major credit card.  This way, your credit inquiries will be low.  If you get denied, try applying for a department-store credit card.  If you remain out of luck, consider getting a secured credit card.

Additional Pointers

Save whatever you can!  Don’t wait for past due accounts to be charged-off.  Remember, charged-off accounts stay in the report for seven years while bankruptcy remains in your report for 10 years.  However, if you seriously think you need professional help, then, you may want to consider undergoing “consumer credit counseling.”

You are capable of repairing your own credit.  All things are reparable – your credit included.  Of course, credit repair does not happen overnight.  It is always easier to ruin than to repair your credit.

Thanks for reading this quick credit repair fix – credit repair how to.

- Guest Contributer, Melony Smart

“Tell me the words I never said; show me the tears you never shed.  Give me the touch, that one you promised to be mine. Or has it vanished for all time?  I let you go, I let you fly.  Why do I keep on asking why?”  This is the Broken Vow sung by Josh Groban.

Divorce is a tough life event to go through.  It is the end-all for marriage but is it the end-all for everything?  It may signal the end of romance but it will probably not signal the end for credit ties.  It causes emotional distress and worse, financial anxiety.  Where marriage ends, financial and credit setbacks begin!

Divorce Hurting the Credit Rating

Divorce costs you financially.  It will take its toll on you sooner than you know.  Generally, men take care of the tasks pertaining to conjugal assets and liabilities.  In other words, it is usual practice for the husband to pay home and car loan payments, apply for loans, file income tax returns, etc; the money may come from both parties, but financial decisions have traditionally been the province of men.  Of course, that was before the reality of divorce ‘became very real,” so to speak.  Today, women should keep their own handle on their own financial affairs; otherwise, they’d be lost after the divorce.

A divorce dissolves a marriage; however, when it comes to joint financial obligations, the decree only remarks on who is responsible for accounts opened during marriage.  In other words, contracts entered into with creditors stand even after the decree has been handed down .

If the designated spouse fails to pay the bills and no change has been made in the lending contract then missed payments will reflect on both of your credit reports, thereby creating negative impacts on individual credit scores.  In that case, you will have to take responsibility for the ex-spouse’s inability to pay the dues.  Collection agents will become your phone pals.  Demand payment letters will replace the usual love letters.  Headaches will become a substitute for heart-pumping romance.  Your credit score will drop while your late payments pile up.

If you don’t want to fall into this after-divorce trap, you should do all you can to avoid all possible pitfalls.

Let Your Credit Records Divorce

The best thing to do after divorce is to peruse all your financial records.  You have to pay special attention to loans, credit card accounts, bank accounts, etc which you or your spouse has procured within marriage.  Pay attention, too, to those which you have jointly accomplished with your ex-spouse.  Check the agreements (especially the fine print and supplementary documentation) for each and see if there are clauses that name you as co-borrower and guarantor, especially ones that state you will be responsible for your ex-spouse’s dues.  If you find such terms, you should consult your lawyer and have such terms updated to reflect your currently divorced state.  Leave no stone unturned in your research.

Even after you are satisfied that everything is in order, you should not rest easy.  You should get a copy of your credit report and monitor your credit rating regularly.  Make sure that there are no erroneous reports on your record and that no trace of the ex-spouse’s financial responsibilities and accounts is on it.  Should there be need for any correction, inform the credit bureau and the financial institution concerned.  Then go back to being vigilant.

Divorce is no cut-and-dry process.  It leaves many loose ends that need tying up, or as Maroon 5 puts it in This Love, “I’ll fix these broken things, repair the (sic) broken wings, and make sure everything’s alright.”

Let the rule of thumb on credit be known.  “A bad credit rating means higher interest rates and ultimately less money saved for you.”

Kill Your Credit Rating

Pay late: Did you know that delinquent payments are a surefire way to ruin your credit score?  With one missed payment, you would be categorized as a different class of customer – a late-paying customer who will get penalized.  A late payment may be forgiven – your late fee may be waived and the interest rate may be brought back from a delinquent level to standard – but it’s not forgotten.  It’s noted down in your records.  The next time you’re late paying your dues, you’re not likely to be forgiven again.  Your late fee will not be waived and your rate will not be brought down until after some time; in any case, any special rates – an introductory balance transfer rate or a 0% interest purchase rate – that you may have enjoyed before you paid late the first time will probably be the first of your ‘privileges’ gone the first time you paid late.

Apply for several credit cards or loans in a span of few months:  Applying for a credit card account or a loan one after another and with a short time interval in between each application is a signal to the lending institutions that you need money badly.  This, to them, is a sure sign that you are a bad credit risk.  The credit bureaus will be informed of each application, especially of each rejection, and you can watch your credit rating go down the drain.

Max out your credit line: Does maxing out your credit limit help establish a good credit rating?  Absolutely not!  Finance experts advise credit card customers to maintain their balances at levels that are no higher than 35 percent of their credit line.  If you are always maxed out, one unthinking expense will push you over your limit.  Going over your limit carries stiff penalties, and getting assessed a credit risk in one institution can lead to a rate hike on your other accounts.

Pay with a no-good check: You always pay your bills on time.  One time though, you made out a check to your credit card, lender or service provider from a closed checking account or one with insufficient balance in it.  This one mistake will set a series of bad events in motion.  First, you will be charged by the intended recipient with a no-good check fee.  Then you will be late paying your bills, which means your credit card company, lender or service provider will charge you a late fee.  Then your bank will charge your bank account with a service fee for a refused payment.  Of course, with all these going on, there’s a good chance your interest rates will increase and your special rates will expire in result.  There goes your good – or rather formerly good – credit then.

Ignore bills and fines: Do you have unpaid petty fines such as parking tickets and library fines?  Do you ignore your billing statement from credit card companies, loan companies and service providers?  Note that municipal governments nowadays are sending their outstanding fines to collection agencies; not all of them do, but some definitely do.  You just don’t know who is and who is not reporting.  Lending and financial institutions also have their own in-house collections department; they can also let a third-party collection agency collect on their behalf.  One thing is for certain though:  collection agencies can crash your credit rating to death.

Erroneous reports: Erroneous reports from anyone – government, service providers, department stores, financial institutions, etc – about your supposedly unpaid debts, open credit card accounts, unpaid and delinquent loans, unpaid bills, etc. are going to stay in your credit report and weigh down your credit rating until they are corrected.  Thus, one sure way of ruining your credit is by not having mistakes corrected – and making sure wrong records and reports stay off permanently (they can come back if you do not monitor your report).  You should keep an eye on your credit report; you can order a free copy from the credit bureaus once a year.

What is the point I am trying to make?  Wherever you go, score plays a vital role.  The same thing applies to credit scores.  The higher you get, the better off you are.  You won’t have any trouble getting the loans that you need to finance your plans; the creditors will be flocking to you to offer you a loan or, at the very least, let your loan application papers go through without question.

What is FICO?

FICO stands for Fair Isaac Corporation, known as the best and most widely used credit score model in the US.  FICO scores are derived from customer’s credit information.  Banks and other lending companies base their lending decisions on this score.  It helps them determine the interest rate to charge the loan or credit line applicants, the amount of loan to award, the collateral or security to require (or if there’s to be such a collateral), the income and asset verification procedures to follow, etc.  If you want great credit options, then you want a decent FICO score.

Ways to Protect your FICO

Know the math!

Thirty-five percent of your score is based on your payment history.  It is therefore given that on-time payment of bills will translate into a better credit score. Late payments will definitely create an adverse affect on your score, and non-payment of dues will create an even more adverse effect.

You have to pay petty fines like library fees, traffic fines or parking tickets.  This may sound irrelevant but the truth is that non-payment of these things will negatively affect your FICO rating in as much as non-payment of credit card dues and missed payments will.  Great importance is given to these small debts because of shortfalls in budget which resulted from overspending when higher tax revenues were earned.  Some municipalities even pass their credit collection hats to collection agencies.  When these agencies report that they are after you, you can expect to see a slide on your FICO Score.

Avoid credit card charge-offs and loan defaults.  Make it a point that you pay at least the set minimum payment each month.  Remember that a delinquency will stay on record for seven years.  If you’re considering filing bankruptcy just so to avoid delinquency issues, think twice.  Such a move will completely devastate your score.

Thirty percent of the score is based on outstanding debt. How much do you owe on car or home loans? How many credit cards do you have that are at their credit limits? The more cards you have at their limits, the lower your score will be. The rule of thumb is to keep your card balances at 25 percent or less of their limits.

Moving along with the math, 15% is based on the length of your credit history.  Closing of old credit card accounts is not advisable for it will only make you a potential credit risk in the eyes of lenders; closing credit card accounts with outstanding balances is also damaging.  On another note, you should not open more credit card accounts than you actually need.

A further 10% of your score is based on credit inquiry accounts.  Quit applying for several loans at the same time or within a short period of time.  It will make you look more of a credit risk.

The final 10% of the score is based on the types of credit you currently have. It will help your score to show that you have had experience with several different kinds of credit accounts, such as revolving credit accounts and installment loans.

FICO is a numbers game.  A FICO score is just a score, BUT this score can make or break a person!

Face it:  people will jump at almost anything that’s offered gratis.  Extra, specialized knowledge is no exception.  And while the best things in life are free, the really good stuff seems to be few and far between.  That is, unless you know where to look.

Introducing FreeCreditReport.com, designed to help liberate you from the burden of credit ignorance.  There is no knowledge that isn’t power, and FreeCreditReport.com is there for precisely that purpose:  empowerment.

In a nutshell, FreeCreditReport.com helps you keep a close eye on your report from the Big Three of credit bureaus:  TransUnion, Equifax and Experian – the last of which is actually behind the service.  Signing up for it will net you a host of privileges, including e-mail alerts of important changes and warning signs of possible identity thieves.  In fact, Experian will grant you both a credit report and a credit score – absolutely free—just for trying out FreeCreditReport.com.

Besides those perks, subscribers also get Experian’s US$ 50,000 guarantee, otherwise known as the Triple Advantage.  In simple terms, you can expect a reimbursement from a third party called ConsumerInfo.com of up to fifty grand under certain conditions.  The company will only pay you in the unfortunate event that someone poses as you and uses your confidential information without your knowledge or consent.

Should you opt to pay for membership, you’ll be able to avail of credit scores and a lifetime supply of printable credit reports courtesy of Experian.

Pros:  It sounds misleading, sure, but the free credit score report and the free credit report upon registration are just the hors d’ oeuvres before the main course.  You get such goodies as multiple copies of your credit reports and online access 24/7.  Unlike the extra service appended to the default annual credit program, this one doesn’t spam your e-mail inbox like there’s no tomorrow.  Oh, and did we mention you get a response from them within the same day that you send them e-mail?

If you want quick access to your credit reports and credit scores plus a guitar serenade on the side, then FreeCreditReport.com is the way to go.

Cons:  It’s true.  The service is free…for seven days, that is.  As with any service, you’ll have to shell out a fee (US$14.95 after a week of and every month thereafter) after the trial period ends, unless you cancel your membership.  Note that that is only the initial fee.  The other, more comprehensive option of three scores and credit scores each will cost you US$39.95.  Fortunately, FreeCreditReport.com is very transparent about the fees you’ll need to pay.

Potential subscribers, take note:  after you sign up for the trial period, you may actually have to wait a few days before credit monitoring actually begins.  Some “wait training” is definitely in order.  Also, if you’re a resident of New York, you are unfortunately not qualified for the Triple Advantage promo, simply because restrictions in New York state law forbid you from doing so.  Bummer.