Credit card companies went into full attack mode as soon as the act was announced. Finding loopholes became an industry norm and interest rates soared to the highest levels seen in many years. Banks now charge a penalty annual percentage rate for a payment that is one day late and will continue to double cycle bill until it is prohibited on February 22.

What else can consumers expect?

Banks will now begin to place limits on inactive cards. Inactivity fees or a reduction in credit limits are two penalties consumers will see if cards sit inactive for a long period. Some banks will close inactive accounts.

Inactive accounts do not make money for banks. They do not have interest fees or other fees from which to garner funds. The bank does have to print and send the card and monthly billing statements which results in a profit loss to the credit card company.

Consumers can now expect banks to consider more than credit scores when issuing credit cards. It is no longer enough to keep a good credit rating to qualify for a high credit limit. Credit card companies look at environmental issues and other factors when issuing cards. For example, a person living in a low-income area with large numbers of unemployment will receive a lower credit limit than a person with the same credit rating living in a ‘better’ neighborhood.

Banks use very sophisticated technology to determine a person’s reliability. They do not want to be left holding the bag, especially after the recent down turns in the economy and the new limitations on credit cards.

Since banks will be banned from going after college students, they must find a new group of susceptible individuals to catch in their web. College students were the perfect target with their tendency to overspend and stay loyal to the first credit card company who gave them a charge card. Banks will now go after the parents of college students, convincing them to co-sign for their child’s credit card and offer such features as parental control monitors.

A surge in secured credit cards is expected. A secured card will be popular with consumers who have bad credit due to bankruptcies or other reasons. This type of card can help them rebuild their credit. Secured cards do have fees associated with loading money but these are usually not substantial and less than interest fees on standard credit cards.

One of the largest fears consumers face is debit card fees. The lack of any fees, when used conservatively, makes debit cards popular with consumers. However, some banks are putting fees on debit cards. The first debit cards to feel this charge will be ones with rewards programs. It will most likely come in the form of an annual fee.

The new credit card act, once thought to ease consumer fear, gives Americans new reasons to worry about credit cards. The smart consumer must stay on top of the economic and financial news and make smart decisions to protect their credit in 2010.

Though the fees are high, they do serve a purpose which is why there is a market for them. People with credit problems have trouble getting credit cards and these types of credit card accounts are good for building credit as long as payments are made on time.

With the passage of the new Credit CARD Act, consumers can expect to see some changes to the subprime card account conditions. For examples, interest rates are expected to go up, and in many cases they already have increased. There are also companies issuing these cards that have already changed the interest rates from fixed to variable. In fact, there will probably be all kinds of new fees showing up on all credit cards and not just subprime cards.

The problem is that the fee-harvesting cards already have high rates of interest and fees so increases make the cards even more expensive to hold. The National Foundation for Credit Counseling is not happy with the increasing fees. As a spokesman so aptly point out, people using these cards are often people who have trouble managing their debt. Adding more fees to the cards only makes the situation worse.

There are some requirements of the new law that will benefit the subprime card holders. For example, the fees to obtain the card cannot exceed 25 percent of the approved limit during the first year. There is a catch though. The fees can be assessed at 50 percent of the approved credit limit but must be spread out over at least five billing cycles.

The subprime credit card companies are bracing for a lower level of business in 2010. In fact, First Premier says it expects the number of new monthly accounts to drop from 200,000 to 20,000.

The new law requires credit card companies to be more honest about how they describe their interest rates and fees. Full disclosure in understandable language is required. For example, instead of saying the interest rate is 10% and the fees are $147, the company must say they charge 75 percent interest the first year.

The Credit CARD Act rules are going to probably result in some subprime card companies going out of business. Though the cards do not have the most desirable fees, they do serve a particular market that needs the service. People who use these types of cards often do so just to rebuild credit. Once the credit score is restored, the consumer can drop the card and get another that is not subprime.

During 2010 there will be a lot of changes in the credit card industry. The full impact will not be known for many months.

With the start of the New Year and the approach of tax filing season, it is the perfect time to evaluate your financial condition and making sure there are no signs of identity theft, begin planning to improve your credit history, and correct errors. For millions of Americans this means looking back at what was an extremely difficult year and half. The economic recession led to many black marks on credit reports because of foreclosures, late payments on credit cards, and loan defaults.

Unfortunately there are also millions of people right now who are facing collection agency efforts to collect past due funds. Businesses are making use of collection agencies sooner than they did in past years as the number of late payments and defaults rise. Though the law prohibits the abusive actions they used to be known for utilizing, collection agencies remain persistent and unrelenting in their demands for payment.

There are many reasons beyond checking the status of defaults on debt for verifying your credit history. People who have changed addresses sometimes fail to get statements and notices from debtors. Right now credit card companies are busy changing their interest rate and fee policies ahead of the implementation of the Credit CARD Act that places limits on these activities. One late payment is all it takes to see your interest rate double or triple and to be charged an exorbitant late payment fee. The fees for over-limits are skyrocketing too.

For all these reasons, now is the time to review your credit report. Each consumer is allowed to request a free credit history from one of the major credit bureaus each year. With the credit history you can check for the number of late payments, closed accounts, unauthorized use of your name and social security number to obtain credit, and outstanding balances compared to available credit. Any questions you have should be directed towards the company which means making a telephone call or writing a letter.

The credit history is a snapshot you can use to look for errors and identity theft. It is not your credit score though. Many consumers don’t understand this and are surprised they are unable to get their credit score until they pay a fee. The law only says you can get a free credit history or credit report.

There is only one place to go to collect your free credit report. Consumers should go to AnnualCreditReport.com and request the report. In some cases, you will be asked to download a form from AnnualCreditReport.com for completion and mailing. The site will ask you a couple of questions that you should be able to answer to confirm your identity. If your answers do not match what the site expects as the correct answer then you must mail in a form with proof of identity to get your free credit report. The fact you cannot answer the questions as expected does not necessarily mean there is a problem. Companies (like mortgage companies) are constantly merging and being bought out, and you may not be aware the name has officially changed for example. So don’t panic if the website asks you to download and mail in a form.

You can also call (877)322-8228 and request your free credit report.

One of the advantages of requesting your free credit report through AnnualCreditReport.com is that you will not be asked to buy any other services or products.

The New Year is the perfect time to get your free credit history and start the year fully informed about your credit status.

Can you say how one credit score is different from another? You may know the number, but now you are about to learn what that number means.

720 And Up

A credit score of 720 and up is good news. You’ve taken great care of your credit. You will be able to get your hands on the best lending rates and you will be able to borrow large amounts. You may even be permitted to borrow in excess of 80% of the total value of your home.

More than that, you may not even be required to purchase private mortgage insurance.

You will also be able to get fantastic deals on credit cards. Shop around. With a credit score in this range you should be able to secure an interest rate that is well below the norm.

Between 675 And 719

When you are in this range, you are no longer the most favorable borrower but you’re still in pretty good shape. You will not be getting your hands on the best rates anymore but you will be able to find some good deals. Finding a loan should not be a problem. You are going to be a step below those who find themselves in the top category but you are still in a position to get what you want and to do so while receiving good deals.

Between 620 And 674

Now you are moving down the credit score food chain. No longer in the upper categories, you now find yourself amidst the below average credit score holders. This is where the number of options available to you will begin to dwindle to some extent.

Odds are, you will be paying a premium on any loans that you acquire as well. You will have to work harder to get loans and credit options that are not as good. You may be required to furnish more documentation to prove your viability as a borrower.

This is not a terrible position to be in. From this vantage point, you can see better credit scores and start working you way back into the good graces of credit. Demonstrating your commitment to improving your credit score will help you to secure better credit opportunities in the future.

620 And Under

This is the credit score range that can make life difficult. You are not exactly an appealing borrower at this point so you just need to do the best you can with the options you are offered. With a credit score that is this low, you are going to pay more even if you are approved for loans or other forms of credit.

Understanding what your credit score means is essential. You want to know the advantages of your credit score or the obstacles that may come along with it. Understanding the effect that your credit score will have on your life may inspire you to improve it too. At the very least, you will know where you stand.

There has also been a lot of negative publicity aimed at credit card companies pre-empting the law by raising interest rates and fees. The reason for the high rate increases now is because the new law limits when and how the credit card companies can change customer interest rates and fees.

Through all of this it is easy to lose sight of the fact that consumers have a responsibility to manage their credit cards. The new law takes effect in February 2010 but customers can begin right now to manage their credit card debt. One thing that has confused many people is having their credit lines reduced even when they have an excellent payment history. This has just been one of the many consequences of the rule changes being absorbed by the credit card companies. So consumers need to understand that even in these types of situations, it is still incumbent on them to manage their debt responsibly.

Consumers can minimize the chances of having their interest rates increased or their credit limits decreased by lowering the balances on their accounts and making timely payments. And the wider the difference between credit limits and credit used, the better for the credit score.

If you want to avoid having a credit card cancelled, you need to use it periodically to keep the account active. Credit cards not used by customers have no value to the credit card business. You also have to watch out for inactivity fees that are currently being implemented in advance of the Credit Card Accountability, Responsibility and Disclosure Act.

When you get a credit card statement, it is important to read it carefully. The new law requires credit card companies to give customers and opt-out option for cards when rates are changed. Since many companies are making changes now in advance of the new CARD Act, it is important to keep a close eye on changes to your account. The types of changes that will be common include offers for over limit programs with expensive fees. The reality is the over limit programs are really not necessary if you manage your credit card usage in a responsible manner.

It is advisable for consumers to spend some time now to review their credit reports and scores. You should look at the open accounts on your credit report and decide if each account is necessary. When an account is closed, it will lower your ratio of available credit to used credit though. This is just one example of how manage a credit score.

The new Credit CARD Act is having some unintended consequences already as the credit card companies prepare to preserve their revenues and profits. Over the last ten years, consumers had become somewhat immune to credit card offers. Now it is time to actively manage the accounts, offers and terms.

Non mortgage consumer credit has been falling at a steady rate. As of September 2009 revolving consumer credit was still falling and had hit a 13.3 percent decline when calculated at an annualized rate. Though it is good that consumers are reducing their debt load, it also indicates less spending and spending is what spurs the economy.

But the fact is that millions of consumers are now wondering if those black marks on their credit history will prevent them from borrowing money in the future. The answer is: maybe. But that should not stop consumers from working on restoring their credit. The economy will not be in a recession forever, and at some point people will want to start buying houses again and taking out loans. The consumer credit market is bound to loosen up in 2010 and beyond and now is the time to begin credit repair.

Unfortunately the credit rating companies really don’t care why consumers fell behind in their payments. They can seem a bit ruthless to consumers, but they are also trying to keep credit ratings unbiased. The fact is that credit repair can be accomplished, but it can take years. That means the sooner you start…the better.

There are a number of ways to restore credit over time.

Ask to have a statement added to delinquent accounts providing additional explanation that might be helpful to anyone looking at the report
Payoff any small balances as soon as possible and begin clearing up your credit report
Get a secured credit card if you have had credit cards cancelled in the past due to late payments or bankruptcy
Get credit through a retailer when purchasing something you can afford and re-establish a good account payment history
Accept department store or other credit cards but don’t use them except once a year to keep them active to create to create a positive “extended credit versus credit used” score (but don’t get too much credit either )

You will notice that the only way to re-establish credit is to create credit lines. It would seem that consumers with poor credit histories would not want to open credit lines. The difference is that consumers who once borrowed money they could not repay now need to create credit lines but not actually borrow the money (except for small charges to prove repayment reliability).

There is nothing quick about restoring credit and millions of Americans are now faced with doing just that. The good news is that it can be done and one day banks and financial institutions will want their business again.

You have heard all the typical ways of approving your credit scores at least a hundred times but these are not the only steps you can take to increase your credit score. Take a look at these new ways to improve your credit score. They could make all the difference.

Ensure That Credit Bureaus Are Aware Of Your Credit Limits

Most people assume that credit bureaus have all the information but this is not always true. Some credit card companies neglect to submit your credit limit along with the rest of your relevant credit information.

This could cause problems for you even if you do not have any credit problems to speak of. Without your credit limit as a reference point, potential lenders and others who check your credit score could be misled.

A high balance on a credit card is a relative thing. For example, $1,000 may be a high balance for a credit card with a credit limit of $1,200 but not for one with a limit of $10,000. If you take the time to make sure that each of your credit card companies reports your credit limits then your score will accurately reflect your situation. This can improve your credit score instantly.

Make Sure That All Your Positive Past And Current Credit Is Represented On Your Credit Report

You have taken the time to maintain your good credit but your credit report may not reflect this. Sometimes not all of your past and current credit information makes it onto your credit report. If these missing accounts of your credit history are positive and are omitted then your credit score may be lower than it should be.

The way to fix this is to request a copy of your credit report and to review it. If you find that information is missing then you will need to contact the appropriate lenders to ask them to submit this information to the credit bureaus. You also have the option of contacting the credit bureaus directly with documentation proving that your good past credit accounts exist. This move allows you to benefit from all of your good credit history. Without the benefit of all your good credit, any credit mistakes you have made will adversely impact your credit score more than they should.

Don’t Add Or Close Accounts Without Considering The Effects

You do not want to make these changes without thinking them through first because they could lower your credit score instantly. Applying for numerous new credit accounts can lower your credit score all on its own. This is why you never want to apply for new credit accounts unless they are completely necessary and you have weighed the pros and cons of this action.

Likewise, you don’t want to close credit accounts. This will lower your credit score by shortening your overall credit history and lowering your available credit. These tips are more about protecting your score but a credit score saved is a credit score earned.

Everyone can stand to know how to improve their credit. It will come back to haunt you if you do not maintain or regain a good credit score. Use these new ways to improve your credit score.

You do not really have the money but credit can carry the burden of extra bills and allow you to put off dealing with expenses until a later date. Some credit missteps are harder to avoid than others, however. Here are 3 easily avoidable credit pitfalls that you can familiarize yourself with and never have to point to again as your reasons for your credit problems.

Credit Scams

There are all kinds of credit scams out there. You can find them online, on the phone, or even in the mail. Scam artists will do whatever is necessary to get your credit card information so that they can win some free money courtesy of your credit cards. You may believe that such scams are easy to avoid but these scam artists are becoming more creative every day.

These days, credit scams and credit fraud are so prevalent that scam artists are using fraud protection services as a cover. They often contact unsuspecting individuals under the guise of fraud protection services just to get credit card information. They will tell a credit card holder that fraudulent charges have been made on an account and that they need to confirm certain account information. It is when the cardholder, thinking they have already been the victim of credit fraud, reveals this account information that the credit fraud actually occurs.

Co-Signers Who Don’t Pay Up

Be careful whenever a co-signer is involved. Friends, family members, and even spouses seem like ideal candidates for so-signer agreements but your name will be tied to these debts until they are paid off. While you want to help out those closest to you, having your name attached to these accounts if they are not paid off can be a major blow to your current credit rating and to your ability to obtain more credit in the future.

Sometimes these co-signer problems cannot be avoided or it is too late to avoid them. If this happens then you want to do whatever is necessary to handle or close these accounts. Know that your credit will be vulnerable until you do.

Using Credit To Live Beyond Your Means

This is the oldest credit problem story in the book. People use credit to spend more money than they have and, unsurprisingly, they have trouble when it comes time to pay off this debt. Spending more money than you have to maintain a lifestyle you cannot afford is how crushing debt is born.

Keeping up with the payments on overtaxed credit accounts is bad enough but sometimes unfortunate circumstances make the situation impossible. You could lose your job, the one that did not pay enough to maintain your lifestyle, and still have all the payments without your main source of income to keep the wolves at bay. While you could not afford this life before, now you cannot even begin to pay for it.

These are 3 easily avoidable credit pitfalls. Credit scams, delinquent co-signers, and a lifestyle that you cannot afford are all ways to quickly amass poor credit scores, large amounts of debt, and some bad times. These situations can be avoided if you keep an eye out for them and think about the potential consequences of your actions.

It can affect your ability to buy a car, a house, and what kind of mortgage rates you get. Your credit has a major impact on your life so the more you understand about it the better.

What Makes Up Your Credit Score?

A credit bureau collects information about your financial history. This information comes from your payment habits with banks, finance companies, credit unions, and retailers. It is basically made up of your credit history.

This includes information such as when you opened each account, the credit limit or amount of the loan, your current balance, and your monthly payment. This report also includes all of the more negative aspects of your credit history which could include bankruptcies, payments that were late, and liens. This information is collected into a comprehensive report that is then accessible to both creditors and lenders.

What Your Credit Score Means To You

Everyone knows that having good credit is important. There are many times in life when your credit score will affect what you are able to do financially. If you do have a good credit rating then lenders will look upon you more favorably.

Because you have a history of paying off your debts and doing so on time, you are seen as someone who is not a risky investment. Lenders want people who are going to pay back loans so a good credit score means that you would most likely fall into this category.

Your credit score can directly affect your mortgage rates. A higher credit score will mean that you will get lower mortgage rates and lower payments while a lower credit score means that you will be paying more for higher mortgage rates. If your score is extremely low then you may even be denied credit.

Is A Low Credit Score The End Of The World?

Low credit is not the end of the world, but you want to do everything you can to keep your credit score as high as you can. You will end up paying more if you let your score get low. There are special loans for those with extremely low credit, but this is not the most desirable route. You want to keep your credit score high.

To maintain your credit score, you need to know what it is. This is why it is imperative that you check your credit score on a regular basis. By checking your credit report even once a year, you can be aware of what your credit is and you can check for any mistakes on your credit report. You never know when some sort of error could occur on your credit report, and you do not want to find out about it when you are applying for a home loan. Regular checks avoid uncomfortable situations.

Knowing what credit is and what that means for you helps you to understand the importance of maintaining good credit. It also helps you to understand just how you can maintain that good credit and how important it is that you check up on your credit score. Low credit is not the end of the world, but good credit helps guarantee smooth sailing.

After all, if you use debit, you’re reducing your cash on hand; if you use credit, you’re putting the expense off until the future, perhaps a point in the future when the economy will have improved and you’ll be in better shape? It almost seems to make sense.

However, it’s not quite that easy.

When the temptation to go with credit over debit comes up, it can almost seem too good to be true. If it *does* seem like that good of an idea to you, it’s almost certainly because you’re temporarily overlooking the critical factor of interest. When you spend money on a debit card, granted, that money is gone, and you’re not going to see it again. That can be a scary thought in a climate when people are losing their livelihoods. However, if you resort to using credit instead, you’re going to have to pay back more than you spend; in some cases, far more.

So, the hundred dollars on groceries that you “save” today by going with a credit card can easily turn into two or three hundred in just a short amount of time, especially if it’s going to be awhile before you pay off your full balance. And let’s face it: it will be awhile. If you had the money to spend on paying off your full balance soon, you’d just use debit, right? If you’ve got to use a credit card for a purchase, you have to assume you’ll be paying it back in increments and accuring interest all the while.

Some people will cite certain advantages that credit cards supposedly hold over debit cards, such as the fact that they allow you to establish a good credit rating, and occasionally offer other incentives such as cash back on purchases or frequent flyer miles. You have to ask yourself, however, whether or not these advantages really outweigh the risks that you’re taking upon your shoulders whenever you choose to use a credit card in a risky economy.

In most cases, the cash back doesn’t end up amounting to much, usually somewhere around 1% on purchases. It can almost guarantee that your interest rate is higher than that, and thus, pretty much negating any benefit you might have gained. Besides, if it really means that much to you, there are many debit and bank cards that now offer similar incentive programs. Ask your bank if you can sign up for one of them.

We understand that the temptation to resort to credit can be huge. However, think about the reason you’re considering it – you’re looking to the future, with hope that the economy will improve. Ask yourself – isn’t it better to weather the storm now, so that when that improved economy does come around again, you aren’t still stuck in the rut of paying off long overdue bills? Think ahead, and plan for the long term, especially when it comes to your credit.