With yet another interest rate hike expected this week, you can expect the rates on your credit cards to soon follow.
But you do have some degree of control over the interest rates on your plastic. Explaining that is Stephanie AuWerter of SmartMoney.com, filling in this week for Ray Hennessey.
Do you know your credit score? Having a good credit score means you get the best interest rates on all sorts of loans including your mortgage, home equity loan, car loan and credit card debt. The most common credit score used is your FICO score. The score ranges from 300 to 850 and it's basically a number that summarizes all the activity on your credit report. Generally speaking a score in the mid 700s or higher is considered good. If it's lower than that, it's time to give it a boost.
You also need to understand how to get a good score. You need to pay your bills on time, but you also want to have a lot of available credit. You don't want to be maxing out your cards. You also get judged on the length of your credit history. The longer you've been using credit and the longer you've held onto your cards, the better. Applying for a lot of new credit all at once will hurt your score.
There are a few things you can do to fix a bad credit score.
First, fix any mistakes that may appear on your credit report. According to a recent study, as many as 79 percent of credit reports have errors - 25 percent of which are serious enough to potentially result in a credit denial. So take a good, hard look at your credit report.
"If you do find a mistake, notify the credit bureau," AuWerter recommends. "They then have 30 days to verify the information is correct. If it's not correct, it's coming off."
Secondly, talk to your lender. Late payments crush your credit score. The later it is, the worse the damage. But if you were late on a payment, you could ask the lender to remove it from your credit report. This is called a "goodwill adjustment."
"It is something that a lender possibly will do for some of their better costumers," explains AuWerter.
And finally, wield your cards wisely. Don't use more than 50 percent of your total credit limit. Having a credit card that's nearly maxed out with a $2,000 credit limit could hurt you more than if you have a $20,000 credit limit and $4,000 in debt. You also may want to hang on to your oldest credit card, even if you don't use it any more. The longer you have had a card, the better.
by Stephanie AuWerter and Jenn Eaker
Copyright 2006 CBS. All rights reserved.