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Forget making changes to your credit card usage – it’s what you don’t do that can increase your credit score (or at least keep it from going south).

Just as you can’t buy happiness, you can’t buy a high credit score – the only way to get one is to demonstrate financial responsibility. “Creditors don’t care about how many millions you may have in your investment account, it’s how you use your credit,” says Maxine Sweet, vice president, public education for Experian.

Steer clear of these 10 things experts say can mangle your score.

1. Thou Shalt Not Avoid Using Credit. If you don’t use credit, you won’t have much of a credit score. “A credit score is an important tool companies use to protect themselves,” Sweet says. The lower the score, the higher the risk, and this can affect whether or not a loan is approved.

2. Thou Shalt Not Miss Payments. Paying a bill late will hurt your credit, but missing a payment will damage it even more. “If you do so, you can’t make it up,” Sweet says. In other words, making two payments in the next billing cycle will not remove the blemish from your credit history. Whether or not you pay your bills on time determines 33% of your score.

3. Thou Shalt Not Limit Loan Types. Despite what your bank account may think, a car payment and a mortgage may not be enough. Also managing an installment debt, such as a credit card, is a good indicator of credit savviness. There are five elements to the credit score model and revolving credit, which allows consumers to charge and owe different amounts each month, is one of them. “It’s 10% of the score,” says Gail Cunningham, vice president of public relations for National Foundation for Credit Counseling.

4. Thou Shalt Not Close Unused Credit Card Accounts. Actually, just use caution, says Sweet. A factor in credit score models is your utilization, which is your debt vs. how much is available. For instance, if you owe $4,800 on a card with a $5,000 limit, you’re using most of your available credit and this “utilization” will have a negative impact on your score. Counting toward 30 percent, your utilization is the second highest factor in your credit score. You should charge no more than 30% of your available credit, recommends Cunningham.

5. Thou Shalt Not Be A Credit Tease. Don’t run up charges all over town or apply for several cards at once while looking for the best rewards program. Recent inquiries means that you have accessed your credit and this can affect your score negatively. “This signals that you’re desperate for credit and don’t have enough cash available for your purchases,” says Cunningham. She adds that if you are shopping for a major purchase, such as a mortgage or car loan, the inquiries will usually roll together into one.

6. Thou Shalt Not Rob Peter To Pay Paul. Don’t charge anything unless you know how and when you are going to pay it back. One of the benefits of credit is the ability to spread out payments on a big purchase, not to delay paying with hopes that the money will come in – from somewhere. If you need to use a credit card for convenience, use a prepaid card or a secured card that enables you to make payments to your own line of credit.

7. Thou Shalt Not Get On The Call List. When a debt turns into a collection account, it’s an indication that you got yourself in hot water. Once a collection agency jumps into the arena, it becomes the owner of the debt, which will show on your credit history. Trying to make payments to the original debtor will not make the collection agency or the negative mark on your credit go away.

8. Thou Shalt Not Forget The Little Things. That library fine you didn’t pay or the health club contract you signed but didn’t honor can show up on your credit report. Any debtor has the right to report unpaid bills to the credit bureaus, and many of them exercise that right.

9. Thou Shalt Not Negotiate. On paying less than what you owe, that is. If you cannot repay a debt in full and a creditor agrees to settle for less than you owe, you haven’t won the battle. The transaction will be reported as a settled account and this will hurt your credit score. Instead of negotiating to lower the overall amount of the debt, ask to have your interest rate or monthly payment lowered so that you can continue to pay the debt off in full.

10. Thou Shalt Not Give Up. If you have late payments, missed payments, defaulted loans, and similar credit mess-ups in-between, don’t give up and think that your credit history is ruined. Although offenses like these generally stay on your credit history for seven years, the recovery clock doesn’t start ticking until you have one full month of paying all of your debts on time, says Sweet.

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Foreclosed on? Just because you may have lost one home doesn’t mean you’ll never be able to buy another. But first, you need to engage in some credit score Rx.

“A foreclosure will cause a credit score to drop sharply, typically by 200 to 300 points,” says Andrew Housser, co-CEO of Bills.com, a free consumer portal of personal finance information. “That would drop a score of 700 – considered a ‘good’ score – to as low as 400 – considered pretty terrible.” The minimum FICO score is 340. This drop can affect your ability to not only purchase a home, but also to secure a car loan and even gain employment. “Lower credit scores can result in being denied credit, such as credit cards and car loans, and facing much higher rates for loans and even other items, such as insurance, that rely on credit scores,” notes Housser.

Don’t lose hope, though. While a foreclosure can remain on your credit report for seven years, it won’t ruin your credit score for life, adds Housser. “If you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as two years. The important thing to keep in mind is that a foreclosure is a single negative item. If you keep it isolated, it will be much less damaging to your FICO score than if you had a foreclosure in addition to defaulting on other credit obligations.”

In fact, The Federal Housing Administration will allow a new mortgage to be approved if a past foreclosure was more than five years old,” explains Alan M. White, assistant professor at Valparaiso University School of Law in Indiana. “The impact of foreclosure on your score diminishes over time, depending on whether you have other active, on-time accounts,” he explains.

Of course, it’s preferable to avoid foreclosure altogether. Here are some ways to accomplish that goal. (Keep in mind, however, that many of these options require you to resume normal mortgage payments at some point. If you can’t afford to resume payments, it may not be worth the effort required to stop or reverse the foreclosure process.)

• Lender negotiation: If there is a reasonable expectation that you will be able to resume making regular mortgage payments within a relatively short time frame, the lender may be willing to work with you to establish a payment plan to bring the loan current. “Especially in today’s market, this is a greater possibility,” says Housser. “Many individuals are having trouble due to an unexpected job loss, medical expenses, divorce or other personal trauma. If the situation has some resolution so that the regular payments may be able to be met again, it is worth it to call the lender.”

• Forbearance agreement: For a temporary hardship, the lender might grant you a forbearance agreement to lower – or eliminate – payments for a limited time.

• Loan modification: This entails a permanent change to the loan, such as lowering the payment and extending the loan’s term or incorporating any delinquencies into future payments. “Lenders are more willing to discuss this now than they were before,” adds Housser.

• Deed-in-lieu of foreclosure: In this case, the lender takes ownership of the home, but that will not eliminate the negative impact of a payment delinquency or foreclosure that has already begun. “Bankruptcy remains on a credit report for 10 years, but it can offer a way to become current in payments, which will improve the credit score,” White notes.

• Refinancing: It may be possible to refinance a mortgage for a lower interest rate and/or lower monthly payment. But if you have already had late payments on a mortgage, the interest rate offered may be too high to lower your monthly payment. Housser recommends using online rate comparison sites and calculators to determine the “real costs of refinancing.”

• Short sale: In a short sale, the lender accepts less than the mortgage debt when the property value has declined. “A short sale will prevent foreclosure,” says White. “However, if it takes place after foreclosure was initiated, the foreclosure and the related delinquency in payments will be reflected on the credit report.” The only way to protect the credit score fully is to maintain monthly payments until the house is sold.

• Chapter 13 bankruptcy: If the loan default is past the point of being resolved with the lender, you may file for chapter 13 bankruptcy protection. This protection requires you to resume making regular mortgage payments but allows the arrearage (being overdue in payment) to be repaid over the course of the chapter 13 plan.

All things considered, a foreclosure won’t ruin your credit rating forever. It will lower your credit score and remain on your credit report until you’re able to re-establish good credit — which takes time and careful planning. Consider your home purchase wisely.

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Your relationship with your credit card provider may seem pretty cut-and-dried. But your credit cards may offer hidden benefits and secret perks that you may not be aware of, which go well beyond frequent flyer miles. Some special offers are listed in the fine print of your credit card agreement, but many others aren’t public knowledge at all. These special offers are only available to customers who know exactly what to ask for and how to negotiate.

From avoiding fees to scoring free hotel stays, here are 10 secret or little-known perks that you may be able to score from your credit card provider.

1. Get an immediate credit limit increase. Though credit providers are less likely to increase your credit limit in the current economic climate than in days past, you can still negotiate a higher balance under the proper conditions, says Ken Clark, a certified financial planner and author of The Complete Idiot’s Guide to Getting Out of Debt.

“The biggest trick is to ask for it in conjunction with a large purchase,” says Clark. If you can make the case that you want a balance increase because you want to make repairs on your home or you’re buying a new laptop, says Clark, your request is more likely to be approved than if you’re simply planning to use the card for everyday expenses. It’s also important to be a long-term customer in good standing. If you’ve skipped out on several payments in the past, the request is sure to be denied.

In addition to providing you with more credit to spend on large purchases, this can be a good strategy to instantly increase your credit score, too. “30% of your credit score comes from what is called the ‘utilization ratio,’” says Clark, which is “calculated by dividing your total outstanding balances by your total possible limits.” So, if the credit limit increase is substantial, “or if paired with paying down your existing balances, it can have a significant effect on your credit score (FICO) in a relatively short amount of time.”

2. Delay a payment. “If you’re having difficulty paying, skip a month,” says Sara Petty, vice president of The Members Group payment consulting firm. Times are tough for everyone these days, and sometimes it can be difficult to even make the minimum monthly payment on your credit card if you’ve just incurred a big expense. If you know in advance that you’re not going to be able to cover a monthly bill, call your credit card provider and ask for permission to delay payment until the following month. Assuming that you’re a customer in good standing without a history of late payments, your provider is likely to waive your late fee and continue to report a “current” payment status to credit bureaus until the following month when you can make the full payment. While it’s never ideal to miss a payment, you can reduce your risk of hurting your credit rating by being honest and open with your provider.

3. Waive your late fee. If you attempt to make an online payment that doesn’t go through, or you never receive an invoice from your credit card provider, you have a good excuse to request that the credit company remove the resulting late payment fee on your next statement. Simply call your provider and explain the circumstances, and the fee will likely be waived. Even if the error is your own fault, you may still be able to get the fee removed from your bill “if you’re a great consumer and haven’t missed a payment in a year or two,” says Clark—however, this request will probably only work once, so be careful about paying on time in the future.

4. Negotiate a lower interest rate. This one is easy, says Clark: “Simply call in with another offer in your hand, and negotiate with them for a better rate.” Be polite, and tell your credit card company that you’ve enjoyed using their service, but you’ve found a better value option. Your credit card provider doesn’t want to lose your business, so you can leverage another provider’s offer to reduce your interest rate significantly, matching or even beating the competitor’s offer.

5. Transfer credit card funds into your bank account. “Consumers who have excellent credit, assuming the bank has a zero percent interest balance transfer offer, can ask for blank balance transfer checks,” says Oren Milgram, CEO of StudentMarket.com, an online shopping and credit resource for college students. There is often a $50 to $75 fee associated with the transfer, but if you don’t have any major upcoming expenditures, depositing the credit in a high-interest online savings account, short-term CD, or Money Market mutual fund can be a way to earn interest on your credit card balance until you need to use the card again. However, be sure to repay the initial funds by the end of the grace period (typically six to twelve months), or you’ll face massive interest fees.

6. Get merchant surcharges for credit card transactions removed. With the exception of schools and government offices, it’s generally illegal for merchants to charge an additional fee for credit card users, regardless of the purchase price. When making your purchase, tell the store manager to waive the surcharge. If your credit card statement still shows an additional merchant fee, you can report the incident to your credit card company as a violation according to the instructions listed in their Merchant Abuse Policy, and the fee will be removed.

7. Double your warranty on new purchases. When you make an expensive purchase like a new computer or refrigerator, there’s no need to buy the extended warranty that you’ll be offered at the store. As long as you use a major credit card to make the purchase, “your provider will automatically match the warranty up to a year on new purchases,” says Clark.

8. Take advantage of your card’s free car rental insurance coverage. Many cards offer free protection against damage on rental cars, so call your card provider to find out if you’re eligible.

9. Get discounted stays or complimentary upgrades at hotels, discounted meals at restaurants across the United States, and other travel perks. Major credit card providers offer many little-known discounts and upgrades on food and travel expenses that are each worth hundreds of dollars. Pull out your original welcome packet, or log onto the card issuer’s Web site for specific deals and offers.

10. Some cards, including American Express Gold, provide Best Value Guarantee (BVG) protection on new purchases made with the card. If you see a print advertisement listing an eligible item for a lower price, send the company your receipt and a copy of the ad to receive a refund of up to $250 against your original purchase price.

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amycgx

Fresh off of the heels of Congress’s passing of the Credit Cardholders Bill of Rights, President Obama sent a proposed law to Congress, which if enacted, would create a shiny brand new Consumer Financial Protection Agency (CFPA). The agency would not only help enforce the Credit Cardholders Bill, it would expand into the broader scope of consumer protection. Treasury Secretary Geithner summarized the agency by saying, “This agency will have only one mission – to protect consumers”.

Knowing exactly what the proposed CFPA would mean for you is based largely on speculation at this point, and the full effects may not be seen for years (and the bill isn’t expected to go to vote until this fall or beyond). However, it’s fair to say that the primary reason behind the proposed creation of the new agency would be to police and put an end to the type of greedy and unfair predatory practices by financial institutions (mostly banks and credit providers) that has resulted in many borrowers suffering from undue financial hardship.

Citing the agency’s crackdown on predatory mortgage lending techniques, President Obama states, “You’ll be able to compare products and see what’s best for you. The most unfair practices will be banned. Those ridiculous contracts with pages of fine print that no one can figure out – those things will be a thing of the past.” Although, I find it hard to imagine that my next mortgage closure will result in anything less than a headache and a mild case of carpal tunnel, having an agency focused on enforcing simple, concise, and clear terms is certainly a step in the right direction.

According the White House’s official press release on financialstability.gov, the CFPA would

1. Provide protection against unfair credit card rate increases and late fee traps: The agency will enforce the credit card bill enacted by Congress and President Obama this spring, taking responsibility for enforcing the ban on unfair rate increases and for the implementation of new rules preventing late fee traps.

In other words, the Credit Cardholders Bill of Rights that was passed recently, but doesn’t go into effect until mid 2010 needs a governing body. The CFPA would be that governing body.

2. Set guidelines for simple “Plain Vanilla” products: The agency could create guidelines for standard mortgages without prepayment penalties; that are fully underwritten with documented income; that collect escrow for taxes and insurance; and have predictable payments.

Remember all of those funky ARM’s, jumbo loans, and other sleek mortgage names masking a product that is designed to rip you off? The CFPA would seek to put an end to these type of products.

3. Duties of care for mortgage brokers: The agency could require mortgage brokers to owe a duty of best execution among available mortgage loans to avoid conflicts of interest between themselves and the homeowners, and a duty to help ensure that only appropriate loans are offered.

A colleague who once worked for one of the nation’s largest mortgage lenders once told me that ‘in the good ole days’ mortgage underwriters would look for any possible reason to offer the largest loan possible and ignore little technicalities such as the borrower not providing proof of income. The goal of the CFPA would be to put an end to this type of practice and ensure that financial institutions are offering the right loan amounts to the right people in the right situations.

4. Ban unfair side payments: The agency could ban unfair practices such as “yield spread premiums” – side payments from lenders that encourage mortgage brokers to push consumers into higher priced loans.

Essentially, what the press release is trying to say here is that the CFPA would monitor and attempt to put an end to broker/institution side arrangements that are designed to steer you into a mortgage that may not be the best for you, but results in the mortgage broker getting a commission.

If you’d like to curl up and read the full version of the CFPA-Act bill, you can check it out here.

The Opposition

The financial industry will surely be up in arms over the bill, because it provides the type of oversight that they have been able to evade for so long. Opponents argue that the CFPA would limit product innovation and dictate what type of loans consumers should receive in certain situations.

Didn’t product innovation and offering ‘customized’ loans mostly get us into this mess?

For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

Madonna

Anirudh Koul

For a material girl, she sure did make a silly financial blunder. She’s been coined as a marketing genius, keeping her career and her image alive for more than twenty years. Madonna faulted, however, by entering into her marriage with Guy Ritchie without signing a prenuptial agreement. Putting her $500 million dollar fortune at risk, Madonna’s divorce cost her a reported $75 million.

Lesson Learned: Keep your financial assets your own. If you have something you wouldn’t want to give away, sign a prenup’.

Nicholas Cage

totsie14

Nick Cage has never played the victim in his film career, but in real life, he seems pretty good at it. Especially, when the tax man cometh. In February of 2008, it was widely reported that the actor used his production company, Saturn Productions, to hide some personal extravagance — $3.3 million, in fact.

Lesson Learned: Personal expenses are personal expenses. Keep your taxes on the straight and narrow. Need help? Invest in a personal accountant. It’s worth the time and your fee for services can be deducted off your next year’s tax return.

Michael Jordan

simplistic.designs

There’s a competitive desire to win, and then there’s a desire to lose all your money to a friendly game of golf. In 1993, Jordan lost $57,000 to his gambling frenzies, and claims exist from Jordan’s colleagues and friends that he lost more than $1.25 million in one golf game alone.

Lesson Learned: Gambling should be a delightful misadventure of sorts, not an “I need money and have to win” sort of obsession. Keep it fun.

Heath Ledger

Howie Berlin

Rest his soul – his death was untimely and unexpected, which is exactly why he should have had an updated will! The Oscar-nominated star of Brokeback Mountain wrote his will leaving everything to his family in 2003. With the birth of his daughter in 2005 he neglected to make an update. When you’re worth an estimated $20 million, it’s advisable to keep your will updated and signed.

Lesson Learned: As lifestyle changes occur and relationships evolve, it’s important to update your will regularly. Set a time once a year to review and update if necessary.

Ed McMahon

Alan Light

“Heeeeere’s Trouble!” Housing foreclosure is becoming all too common of a term these days and celebrities are no exception to it. There’s an irony that exists in Ed McMahon – the man who delivered oversized checks to lucky winners of the sweepstakes – facing foreclosure. After falling $664,000 in the hole on mortgage payments, McMahon found himself in a mountain of debt.

Lessons Learned: In the words of Ed McMahon himself, “Well, if you spend more money than you make, you know what happens…” Don’t buy a house you can’t afford.

MC Hammer

superseven

We know he’s Too Legit to Quit, but he should’ve quit spending a while ago. MC Hammer is infamous for his overspending which led him to file for bankruptcy in 1996, with $13 million in debt. With a net worth of $30 million dollars, Hammer spent a majority of his funds paying over 300 people to work for him, to the tune of $500,000 in monthly wages.

Lesson Learned: No matter how popular, how successful, or how business savvy you may find yourself, a lavish lifestyle can only last so long.

Britney Spears

Cesar Pics

You’re young, you’re rich, and you’re spending it all. Britney Spears entered the entertainment world at the ripe age of eight and has been a force to be reckoned with ever since. When you earn $737,000 per month and don’t allocate a penny toward savings or investing, you are not planning for the future particularly well.

Lesson Learned: Plan now for the long-term. Living in the moment is a dangerous trend.

Examples of financial missteps are everywhere, and the celebrities have done a good job of showing us what not to do. From foreclosure and bankruptcy to investments and tax evasion, the examples are endless. Follow these lessons learned to keep your finances from putting you at risk.

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Andres Rueda

This Friday, President Obama is expected to sign the ‘Credit Cardholders Bill of Rights’ into law. The House of Representatives passed their version of the bill on April 30th by a 361-64 margin. In similar overwhelming fashion, the Senate passed their version of the bill in a 90-5 rout. The House has agreed to collaborate and adopt the Senate’s version of the bill, which has been deemed to be more strict on credit card providers than the House version. So what does this mean for you?

If you’re a student or a minor, you will see the highest level of direct impact:

Students:
For college students that don’t have a co-signer, the max amount of credit extended will be limited to the greater of 20% of the student’s annual gross income or $500 dollars. The aggregate amount of credit extended from all of their credit cards will be limited to 30% of the student’s annual gross income (for the recently completed calendar year).
Creditors are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income or already maintains a credit card account with that creditor, or any of its affiliates.

Minors:
For consumers under 21 years old, the signature of a parent or another responsible adult who will take responsibility for the debt is required, or proof must be found that the under-21 consumer can repay the credit.
Creditors are prohibited from providing credit to consumers under age 18. (unless they are emancipated under state law, or the consumer’s parent or legal guardian is designated as the primary account holder).

But…Everyone with a Card has a Chance to be Impacted by the Following Rules

Existing balances:
Creditors cannot retroactively change the rate on an existing balance unless the account is 60 days delinquent.

Payments:

A consumer payment above the minimum applies first to the balance with the highest rate.
Creditors are required to provide a grace period for payments even if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.

Bill Receipt:
Creditors must send a bill at least 21 days before the due date.

Terms Disclosure:
Cardholders must get at least 45 days notice of any change in terms.
Creditors are required to post their written credit card agreements online.
Creditors need to provide a 30-day advance notice of an account closure.

Credit Scores:
Creditors must remove information provided to a consumer reporting agency about newly established credit card accounts if the holder has not used or activated the account and and if they contact the creditor within 45 days of its opening to close it.

Fees:

Payment fees – Creditors can’t charge fees to pay by mail, phone, and electronic transfer or online, except for expedited service on the due date or the day prior to the due date.

Double billing fees – Creditors are prohibited from charging a finance charge based on the double billing cycle method.

Interest fees – Creditors can no longer charge a fee on an outstanding balances at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.

Over-limit fees – Creditors cannot charge over-limit fees unless the cardholder has signed up to allow them. This is something that you’d be a little crazy to sign up for.

Rate Increase Limitations:

Promotional (teaser) rates - Creditors must extend promotional rates to at least six full months.

New accounts – Creditors can’t increase the annual percentage rate (APR) during the first 12 months of a new account being opened.

Rate changes - Creditors must provide consumers with a 45-day advance notice of changes in rates and significant contract changes.

Gift Cards:
All credit card gift cards must have at least a 5 year life.

I’m a Responsible Cardholder who won’t Benefit from any of the Above. I Pay my Bills on Time. Should I Fear Credit Card Company Retaliation and Benefit Decreases?
Credit card providers have been threatening to do away with all of those nice perks (air miles, cash back, free dog food, etc.) and even start re-instating annual fees again. They claim that with all the revenue loss from the aforementioned changes, they will have to make up revenue somehow.

Ah, but not so fast guys. Let’s not forget that credit card companies make money off of everything that we purchase (~2%) through merchant fees. At the same time, most companies limit their perks benefits to 1% or less. And other fees and interest are not going away any time soon, regardless of the bill of rights. Therefore, they need customers to prosper from , and not many companies are limiting who they providing cards to.

The consumer, not the companies, has all the leverage in the marketplace. If my card company tries to take away my perks, I’ll switch. The odds are there will be more than a few providers that won’t take away perks. If they all come to an agreement to eliminate perks, then I will simply switch to a debit card.

In an ironic reversal of fortunes, they’ll have to take it and like it.
For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

(anirudhkoul)

H.R. 627, more commonly dubbed as the Credit Cardholders’ Bill of Rights, was passed by the House of Representatives by an overwhelming 357-70 vote on April 30th. The bill, yet to be voted on by the Senate, promises reform in the credit card industry by providing protection for credit cardholders.

The Credit Card Crisis

Why is credit card legislation needed? In 2008, credit card issuers levied $19 billion in penalty fees on families with credit cards and this year, card companies will break all records for late fees, over-limit charges, and other penalties, pulling in more than $20.5 billion. According to House Speaker Nancy Pelosi’s blog, “Credit-card debt in the U.S. has reached a record high of nearly $1 trillion — and almost half of American families currently carry a balance, and for those families the average balance was $7,300. One-fifth of those carrying credit-card debt pay an interest rate above 20 percent.”

Something needed to be done to help the average consumer, that much is clear, but what would H.R. 627 mean for us cardholders? Before jumping into the specifics, let’s cover what first has to take place for this bill to provide any protection, as it has a long journey ahead of it.

The Credit Cardholders’ Bill of Rights Journey to Action

1. First, Senate Bill 414 must pass a Senate vote. Passage of 414 is not the guarantee that H.R. 627 was, as it offers added reform, and we can all guess how persuasive the credit card industry lobby must be.
2. Next, Senate Bill 414 must be merged by H.R. 627, so that the two can live in complete harmony.
    
3. Finally, it must be signed by President Obama – this should not be a tough sale.

If the legislation is still alive after all is said and done, the majority of the bill won’t take effect until July, 2010.

Barring major overhauls, how would the average cardholder benefit from the legislation?

A Summary of the Credit Cardholders’ Bill of Rights

To read the entire bill, you can find it on Representative Maloney’s site in its entirety. You may also check out the one page summary. Here are a few highlights from the summary, along with breakdowns on how it could impact you:

Ending unfair or arbitrary interest rate increases

• 45 days notice before rate increase – in other words, you must be allowed sufficient time to prepare for and potentially prevent rate hikes.
• No more ‘any time, any reason’ rate changes.

Letting consumers set hard credit limits to stop excessive over-limit fees

• No over-limit fees on those with limits – no charges for going over your fixed limit – you simply can’t charge any more.
• Cardholders can set limits – if you want to lower your limit to a fixed amount so that you don’t spend too much, you could potentially do so.

Ending penalties for cardholders who pay on time

• No interest charged during a grace period – this is so that you aren’t double-billed. Additionally, you would not get assessed a fee on interest if you pay your bill on time.

Requiring fair allocation of consumer payments

• No more forcing to pay off lower interest rates first, you should now get to at least pay off a fair allocation if you have cards with varying rates.

Protecting cardholders from due date gimmicks

• Statements must be mailed 25 days before due date (up from 14) – giving you more time to get your payment in and avoid penalty.

Preventing companies from using misleading terms and damaging consumers’ credit ratings

• “Fixed” and “Prime” rate must be used according to set definitions.

Shielding vulnerable consumers from high-fee subprime credit cards

• Fees for subprime cards, with fixed fees over a year exceeding 25 percent of the credit limit, must be paid up front before the card is issued. This is because these cards target those who are the most vulnerable.

What will the Credit Cardholder’s Bill of Rights Mean to you?

It’s clear that H.R. 627 is a step in the right direction for consumer protection. But it’s just a slice of a much larger pie.

• How do you stand to gain relief as a result of this legislation?
• Where do you see further room for reform?
• If you actively choose to not use credit cards, do you think that card users should be granted this relief?

Fore more of GE Miller’s writing, visit the personal finance blog 20somethingfinance.com.

You can afford your mortgage, you have a high credit score and you pay your bills on time every month. So why did American Express just slash your credit limit? Could be because of where you shop?

A combination of the credit crisis and the increasing use of predictive analytic models for determining credit limits mean that it is no longer enough just to maintain a good credit rating. With credit card companies analyzing spending patterns, you have to pay more attention than ever to both where and how you shop.

Here are a few examples of some of the ways that good credit may get cut off.

Traveling Overseas

The internet has helped to create an environment where fraudulent transactions are so widespread and so expensive to prosecute, that most companies write off these transactions as a loss – or pass them on to the merchants who are victimized. As a result, credit card companies try to offer extra protection to their customers if a series of suspicious charges post to any individuals account, as a form of loss mitigation. The problem this poses for many travelers, is that the term ’suspicious charges’ is very subjective. Say for example, you are from Des Moines, Iowa and your monthly credit card transactions consist of weekly trips to Ralph’s and your neighborhood gas station. In this case, your spending habits will be scrutinized if you finance a backpacking trip through Southeast Asia. Therefore, it is very important that travel isn’t funded solely on a credit card, because you might find yourself in a foreign country without funds when the available credit is slashed.

Spending in stores that have high-risk customers

Many customers do not realize that their credit limits may be reduced due to where they shop. American Express is on the forefront of this movement, wherein banks would include where customers spend as part of their credit-limiting decisions. the cards are used at places like casinos and bars. To the bank, these are improper or unsustainable use of credit, that has a higher repayment risk.

Don’t Go Near Your Credit Limit, or Over It

One of the most important factors of your credit score is your average ratio of balance to credit line you keep. Keep the balance below 20 percent of the credit limit ideally, and definitely below 50 percent, as this is viewed by banks as more responsible borrowing and not quite a warning sign that you are dependent on the credit. The larger the percentage of your credit limit occupied by balance, the more you are viewed by the bank as being incapable of repaying a debt owed.

Banks often change their terms of your lenders agreement via mail, and a letter regarding a credit line reduction can actually be sent to you after your line has already been reduced. With that said, if you have the propensity to continually keep a higher balance on a credit card, you are more likely to have a credit line reduction. But even someone who keeps a high available balance isn’t safe from this move by the banks. As a result, a credit line reduction could change your balance-to-limit ratio dramatically, further worsening your credit score.

Any bank may reduce a credit line in any way they see fit, and for example a $10,000 credit line with a $3,000 balance could be reduced to a $5,000 credit line with the same balance. This would mean that your balance-to-limit ratio would be doubled, an experience that is increasingly likely to happen to any individual, irrespective of their repayment history. In some extreme cases, a credit line reduction could even be instigated by a bank to a level that is right at the current balance, thus leaving the borrower in a position of potentially going over his/her new credit line when finance charges are assessed. This can have a ripple effect on other accounts, in that, other lenders may see this as a red flag, and consequently reduce your credit line as well. For credit cards, it is good to try and pay off your balance every single month, but if you can’t or if you are already in trouble, make sure to call as credit companies are very willing to renegotiate delinquent balances and interest rates, often reducing 27% rates all the way down to 10%.

Are you paying attention to your credit report?

Most people don’t properly manage or monitor their credit report. And given the current financial climate, banks are consistently looking at ways to stave off risk. Many banks realize that one way to do this is to increase the interest rates of individuals that are paying their bills on time. Interest rate increases typically occur as a footnote that is easy to overlook on a monthly credit card statement, or may be a letter written to you as a “Dear Valued Customer” letter on corporate letter telling you that after years of valued business, you are now being rewarded with a higher interest rate. These letters of course offer the customer an opportunity to opt out or not agree with the change of terms. The consequence is that your account will likely be closed after a certain grace period.

This means that, for those willing to stand up to the credit card companies to say, “I will not stand for this!” there will be an ‘Account Closed’ notation on your credit card. In addition to the account closing phenomenon, not monitoring your credit report can lead to other potentially harmful notations – erroneous or not – staying on your report and affecting your credit. And of course, if your credit report declines, your credit lines are likely to decrease in tandem. Many consumers are unaware of these potentially negative marks on their credit report, or are unaware of ways to get them cleared from their record.

Make sure that if there are any notations on your account, that you process a claim with your bank and with the credit reporting agencies to get these removed. Even if you have made mistakes, you can request an explanation of your errors in writing. If a bank fails to provide this evidence, then the law says it will be removed from your report.