Under the new credit card regulations, companies are forbidden to change interest rates on pre-existing balances for fixed-rate credit cards. However, many credit card companies are switching to variable rate cards for most of their customers. This means that as the prime interest rate rises, so will the amount of interest you pay on your credit cards. This ultimately leads to higher balances which are harder to pay off, and in turn can damage your credit score by causing you to utilize more of your available credit limit than you normally would.

If your credit card company switches you from a fixed-rate credit card to one with a variable interest rate, you can reject the change. However, in most cases this means that your credit card will be canceled at the end of the current agreement cycle. When this happens, if you’re still carrying a balance on the credit card your credit scores will drop due to the fact that your credit report will show a balance higher than your available limit on that card.

When dealing with a credit card that has been switched to a variable interest rate, it’s generally in your best interest to continue making payments until you have paid the balance of that credit card entirely. Then, if you decide to cancel the card you can do so without having as much of a negative effect on your credit report. Currently, because interest rates are generally low, you may even be able to save money versus your fixed interest rate, assuming you can pay the card off in only a few months.

Another option which may help you to keep your credit scores healthy is to pay off the variable rate card, and then use it for purchases that you can pay in full each month. This will help to prevent any reduction in your credit limits, as well as avoid ‘inactivity’ penalties that some banks have begun to assess. If you have credit cards that you haven’t used in several months, now is the time to do so. Make a small charge to keep the account active, and pay it off as soon as possible. Otherwise, you run the risk of owing fees due to inactivity, which can pile up and cause late payments and higher interest rates overall.

Regardless of whether you decide to keep the account or close it, the important thing to remember is to keep the account open until the entire balance is paid off. In this way, you’ll avoid a major hit to your credit scores, which will save you money on any new credit that you apply for.

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Tip 1: Avoid Excessive Hard Inquiries on Your Credit Report

If you are shopping for a loan, avoid applying to several different places and waiting to see what offers you receive. Multiple credit report inquiries in a short period of time can lower your credit score, even if you have an otherwise clean history. If you have your credit score, a better option may be to shop around without filling out the loan application until you’ve narrowed down your choices. If you know where you fall on the credit scale, then you can make a reasonable estimate as to the amount of interest you’ll be expected to pay and the terms of your loan. Regardless, it pays to keep the hard inquiries to your account to a minimum if you are trying to raise your credit score.

Tip 2: Be Alert for Potential Errors in Your Credit Report

This is a tip that may best be facilitated through working with a credit repair company. If you have errors on your credit report that are harming your score, you have the right to dispute these errors and have them corrected and/or removed. If you don’t recognize an account, or if there is erroneous information about the account, a reliable credit repair agency will be able to successfully contest the negative information on your behalf. Cleaning up your credit report will allow you to focus on taking care of any remaining negatives without having to worry about incorrect information having an impact on your credit score. If you believe that you may be a victim of identity theft, then you should also file a police report and notify the credit bureaus as soon as possible – minimizing the damage done by identity theft is essential to any credit repair process.

Tip 3: Work with Your Current Lenders

If you have some accounts that are in less than stellar shape, but that aren’t in dispute, consider trying to negotiate with your current creditors. This can be done through a credit counseling agency in some cases, but you may also be able to work directly with the lender if you have an established relationship that is mostly positive. One particular aspect you may wish to ask about is re-aging. Re-aging is a process that will get rid of your past due account by making it appear as “current” on your credit report. While federal laws dictate how a creditor may re-age your account, in general if the account is over 9 months old, and if you have made 3 consecutive payments and have demonstrated a willingness to continue to make payments, then re-aging should be an option for you. Creditors sometimes use re-aging to make an old debt look new, but if you’re planning to pay, it’s in your best interest to request that the account be re-aged. It’s quick, it’s free, and it gets rid of all the 30, 60, 90, and 120 days late notations for that account if you keep the payments current.

No matter what route you take with regards to repairing your credit, following these tips will help you to improve your score in a manner that is both ethical and long-lasting. Many credit repair companies can provide additional information and counseling about these techniques, and give specific advice tailored to your particular situation.

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