New Credit Laws May Mean New Interest Rates
DIn February of 2010 the majority of laws from the CARD Act went into effect. In the months leading up to the deadline a lot of credit card companies sent out amendments to their agreements or other notifications in the fine print. Many raised interest rates and implemented new or higher fees.
The bottom line is that now may be a good time for consumers to start shopping around when it comes to their credit cards. The first step in that process would be to make sure that your credit scores are at their highest potential so you know that you’re getting the best rates in the industry.
Use Credit Responsibly
Lenders are trying to predict how reliably you’re going to use new credit by analyzing how you’ve used credit in the past. You want to use your cards often while keeping the balances as low as possible. Less than 20% tends to be ideal.
Not using credit at all is no way to improve credit; it’s actually almost as bad as ruining your credit. Since lenders can’t base their decision on your past usage, they’ll lump you into a high-risk category by default. That’s why it’s important to make sure that you are using the cards you have and using them prudently.
Keep Good Accounts Active
Part of the credit score formula is the length of time you’ve had good credit open. If you decide to close unused accounts you may be hurting your score. When possible, keep these accounts open. You may want to use them occasionally so that the lender doesn’t decide to close it due to inactivity.
Ask for Lower Interest Rates
When you see that your credit score is where you want it to be, ideally in the 700’s or 800’s, call the customer service number on the back of your cards. Explain that you would like to stay with them, but there are better offers out there. If you’ve been a good customer and they’re afraid that you may leave, it may be as simple as that.
However, more often than not, credit card companies feel as if they’ve got you hooked. They’re unwilling to lower your interest rates unless your credit scores have moved dramatically. So it may be time for you to move on.
Shop Around for Better Rates
The reason that people don’t shop around for better interest rates is because it seems like additional work for a product they already have. Who wants to go back and read all of that fine print to find the lender that’s providing the best rates? People who want to save thousands of dollars a year, that’s who.
Your interest rates can mean the difference between living paycheck to paycheck and being able to actually put money into savings. It may seem like a bit of a chore now, but you’ll be glad you did later on down the line.
Never Stop Being in Control
So many people just use credit without concern as to what it’s actually doing for their credit profile. Don’t be those people. Pull your credit reports often, actively engage in credit repair, and constantly be working to maximize your credit score. Make every financial decision with the effect on those reports in mind.
If you want to truly improve credit you must educate yourself about your credit cards and their effects. It’s not something you can consider every couple of years when you want to apply for a new card or a loan; it’s a non-stop way of life, a practical approach to your finances as a whole.
