Amongst the circumstances that could cause you to be flagged for a higher rate, high balances on other cards, along with having an adjustable rate mortgage are two of the most common. So what can you do to protect yourself from an unexpected increase? While there is no guaranteed prevention plan, there are some measures you can take that will help to minimize the chance that your credit card is subjected to these harsh new penalties.

Minimize your balances – if you carry a high balance on one card, that credit card company may consider you to be a risk of default and may lower your limit and increase your rates, even if you’ve been paying on time. This in turn can cause a spillover effect, wherein your other credit card companies follow suit, reducing the limit and upping the rates on cards you barely use. The solution? Carry a smaller balance across all of your cards, rather than a high balance on only one. In this way, you have an active account, but the balance is small, which can be seen as less of a risk.

Pay more than the minimum – if you consistently pay more than your minimum balance, there is a chance that your credit card company will see you as a better risk than those who are only making their minimum payments. If you can afford to pay more each month, do so – not only will it help to keep you out of the ‘high-risk’ category, it will also save you money on interest.

Read your credit card terms – many credit card companies have updated their terms of service to include language that allows them to raise your rates and lower your limits if you are late for even one payment. And late may be defined as 12:01 AM on the due date or the day after. Make certain you know what your terms are, and be prepared to negotiate if you feel you aren’t being treated fairly. If you’ve been a steady, good-paying customer for years, some credit card companies may be willing to negotiate better terms. If not, then you may have to adjust your spending accordingly.

Credit card companies have always been business first, and the consumer now, as always, must be prepared to take proactive steps to build and maintain positive credit, regardless of what the credit card companies decide to do.

Unless Experian changes its mind in the future, the only way to get a glimpse of your current Experian scores now is if your lender makes those scores available to you during the lending process. Fortunately, you can still check your FICO scores for Equifax and TransUnion, which will give you a fair idea of the range you can expect when it comes to your Experian score as well. If you are concerned about not having access to your Experian credit score, there are a few steps you can take that will ensure that your score is the highest it can be, even if you don’t have access to your credit score directly.

Credit Report Cleanup

To start, you should get a copy of your credit report from all three bureaus and check for discrepancies – make sure that the information listed on each report is accurate, up-to-date and consistent from one report to the next. In this way, you can be certain that all three credit scores are drawing from the same information. Make certain that if you dispute an item on your credit report, either through a credit repair service or on your own, you dispute that same item at each credit reporting agency – erroneous information left on one credit report can drag down your score.

Third Party Reports

If you’re planning on making a major purchase and you are in the pre-approval process, you may be able to get some lenders to part with your credit scores, not only from TransUnion and Equifax, but from Experian as well. Because Experian is selling their proprietary scores directly to businesses, this may be the only way for you to get a clear snapshot of your score for your reference. Don’t apply for an auto loan, credit card or line of credit just to see your Experian scores, however – multiple inquiries on your credit report can sometimes lower your score, defeating the purpose of your hard work.

Overall, your best approach to maintaining a good credit score is the same that it’s always been. Timely payments to creditors over the long-term will improve your credit score, even if you don’t have direct access to it. Take the time to improve your credit naturally, use credit-repair services wisely, and regardless of your access to your Experian FICO score, you can still qualify for that loan you deserve.

You are Looking for a Job:

If you’re in the job market, having a clean credit record will put you a step ahead of other candidates with similar skills and experience. Employers now, more than in recent years, are scrutinizing potential hires more closely in an effort to make certain that any potential employee will be of the best benefit to the company. Leaving your credit report to chance could leave you out of the running for your next position. Having a good credit score will reflect well on how you will handle the responsibilities of a new job, and allows potential employers to feel confident that you can handle your position effectively if hired. Conversely, people who have problem credit may find it more difficult to get a job as employers look to hire only those who seem to be a ‘safe’ investment.

You Want to Buy a Home:

The market for subprime mortgages is virtually nonexistent now, but buying a home in the current conditions could be ideal if you have a strong credit score. Low interest rates, coupled with the current drop in housing prices could mean that the home you want is finally affordable. However, if your credit isn’t in the best condition, this favorable market could pass you by. Removing negative information that is too old, incorrect or incomplete could help you to qualify for the home of your dreams sooner than you realized.

You Need to Buy Insurance:

Believe it or not, insurers also look at your credit score, and a better credit history will net you lower premiums than someone who looks like a credit risk. The savings you receive as a result of a good credit score could allow you to afford more coverage at a higher tier. Having adequate insurance is essential in a troubled economy, whether that insurance is for you, your house, or your car. Keeping the premiums affordable is just another added benefit to a clean credit report.

These are just a few of the main reasons you might want to look at getting your credit repaired sooner, rather than later in the current economic climate. Now, more than ever, a good credit score can help you to reap the benefits that can be found while companies are tightening their lending policies. A good credit repair company can help you get rid of errors, or debts that should have been removed due to age. By taking advantage of a reputable credit repair service, you can open the doors to financial opportunity even in a troubled economy.

If you are one of the “lucky” ones who received the paid offer, you may be tempted to cancel your card and cash in while you can. However, if your credit score is already marginal, closing an established account could send your scores dropping even further. Even if you have good credit, canceling an established account will lower your score, possibly placing you in a different risk category, which could trigger further adjustments from other credit card companies. And if for some reason you don’t pay off your balance by the deadline, the $300 incentive is lost, leaving you with a damaged credit score and no reward for your efforts to pay down your debt. Of course, if you paid down your debts without taking the incentive to close your account, your savings in interest alone could top $300 depending upon your initial balance.

Because credit card companies often raise rates, fees, and other costs based upon activity on another account, closing your already established account may cause you to have higher interest rates on the cards you do decide to keep open. This can create a cascading-effect that lowers your overall available credit, which, in turn, can lower your scores even further if your debt-to-available-credit ratios fall below a certain margin. This can make it difficult for you to get a new credit card if you decide to open another account to replace the one that you’ve closed. Even if you don’t decide to open another account right away, the hit to your credit score can cause problems in other areas, such as insurance rates, interest rates on loans, and interest rates on any existing lines of credit.

Your best bet when it comes to keeping your credit score healthy is to pay off your credit cards, and leave the accounts open. Use the cards for incidental purchases, and pay them off again as quickly as possible. Keep your card active, and your balance low, and you may be able to avoid getting hit with a rate spike, or an unexpected cancellation. Getting free money may seem like a great incentive to cancel your card, but when compared to the potential downsides to your credit score, your best option may be to turn down free money in exchange for a little extra financial discipline.

1. Talk to your creditors! Some creditors report the use of a debt relief company in such a way that it negatively impacts your credit score. Some creditors won’t work with a debt relief company at all. If you are looking to settle debt for pennies on the dollar, be aware that even if your creditor does accept such a proposal, settling a debt for significantly less than the amount owed will be a serious blemish with regards to your credit score, and will stay on your credit report for up to seven years.

2. Shop around. There are literally thousands of debt relief companies, with more springing up as the current economic downturn worsens. Some of these companies are little more than scammers, looking to take your money and provide little or nothing in return. So, when you’re looking for a debt relief company, take the time to evaluate several – don’t just choose the first one that seems promising.

3. Nonprofit may not mean reputable. Nonprofit debt relief firms may seem to be a safer option, but beware – in some cases, these nonprofit debt relief organizations funnel money to a for-profit companies, while providing you with little or no real benefit. A true nonprofit credit-counseling organization will help you to get concessions from your creditors such as a lower interest rate or waived late fees, and will provide solid advice on how to improve your situation.

4. Ask questions. When you are deciding on which debt relief company to use, make sure to ask questions regarding how the service works. Be certain your credit counselor spends at least 20-30 minutes evaluating your particular situation, and offers advice based upon that evaluation, rather than canned responses. Be wary of any promises that seem to be too good to be true, or that don’t take into account the reality of your situation.

5. Get it in writing. Make certain that your agreement with the debt relief company says the same thing on paper as you discussed over the phone – ask for clarification of any points that you do not understand, and make certain they discuss the impact that their service could have on your credit score.

6. Be wary of upfront fees. Most reputable debt relief companies won’t charge a large start-up fee in order to enroll you in their program. If it costs more than $50 to start, it may be a scam.

7. Check the BBB. No matter which company you decide to use, always check their standings with the Better Business Bureau – excessive complaints are a sure sign that the company may not have its clients’ best interests in mind.

Debt relief companies can seem like a good idea when you find yourself in over your head with creditors, but the truth of the matter is that these companies can often be risky investments at best. At worst, you could see your credit score plummet and interest rates increase due to late fees and other penalties imposed by your creditors. The best advice when dealing with debt relief companies is to do your research and be certain that the services the company offers are worth the potential consequences.

Not paying your taxes on time can have a devastating effect on your credit score. In some estimates, your credit score can drop more than 20 points from a single tax lien. And any tax lien on your credit report will remain there for up to fifteen years. Even if you manage to pay off the taxes you owe, the lien will remain on your credit report for 7 years.

Thankfully, there are some things you can do that can minimize the chances of a tax lien on your credit report. The IRS has taken several steps to help people who owe back taxes, and this year, they are offering options for individuals who may be at risk of tax liens and default:

Flexible Payment Options – if you’ve been making payments regularly, but have suffered a financial hardship, the IRS may be able to allow you to skip a payment, or have a reduced monthly payment without suspending your installment plan.

Collection Action Postponement – if you haven’t been able to pay, the IRS may be able to suspend collection actions if you aren’t able to pay for economic hardship reasons. If the economic situation has recently occurred, you may not have to provide documentation for the initial postponement.

Prevention of Defaults – if you have an Offer in Compromise (OIC) with the IRS and cannot make the payment terms, the IRS will work with you to avoid default and collection activity on your tax obligation. However, you must contact the IRS as soon as possible when the economic hardship occurs.

Because your wages can be garnished for back taxes, failure to pay could also affect your ability to pay other bills, leading to a downward spiral in your credit scores that can prove difficult, if not impossible to correct. With so much at stake, it is essential to handle all tax matters in a timely fashion. Even if you know you won’t be able to pay up front, contacting the IRS sooner rather than later will give you time to make arrangements that can help you to maintain financial integrity.

If you file taxes this year and discover you owe more than you can pay, don’t panic – you can still make arrangements and save your credit score in the process. Contact the IRS and discuss payment arrangements as soon as possible after filing, even if you can’t pay the whole amount. By working with the IRS from the beginning, you can avoid a costly lien and preserve your good credit. The worst thing to do in this situation is attempting to avoid the issue, or putting it off until it’s too late to reverse the collection process. By remaining vigilant with regards to your financial situation, and taking advantage of the proposed compromises offered by the IRS, you can avoid having your taxes negatively impact your credit score, regardless of your ability to pay.

• Use Unemployment Pay Wisely – if you qualify for unemployment, you may be tempted to try to maintain your current lifestyle for as long as possible while searching for a new job. This strategy may not be in your best interests, as unemployment generally does not pay as much as your typical wage. If you do not have savings to fall back on during this time, your best choice is to scale back on what you spend as much as is reasonably possible. Also remember, you’ll need to continue your job search in order to qualify for unemployment, so be certain to keep records of the places to which you’ve applied.

• Prioritize Debt – if you are unemployed and cannot pay all of your bills, it may be time to prioritize. Pay essential bills first, such as the mortgage, electricity, and grocery bills. Bills for expenses such as the telephone or cable television may have to wait, however, you should always keep your creditors informed of the situation before collection notices start arriving.

• Reduce Financial Obligations – drawing from the example above, if you do have cable service, you may wish to cancel it until you have found employment. Likewise, you may wish to cut back on other non-essentials as well. Sometimes, these companies will let you ‘freeze’ an account rather than closing it. This lets the company keep your information on file for when you decide to reactivate the service. However, keep in mind that there may still be fees involved if you go this route.

• Negotiate with Creditors – once you’ve prioritized your debt and eliminated or minimized non-essential financial obligations, you should contact your creditors in order to negotiate payment arrangements that are more favorable to you. Some utility companies may offer you an extended time period in which to pay. Likewise, the bank may extend your payment options on your mortgage, or offer a revised payment schedule until you find a new job. If you show good faith in your intentions to pay, you may be able to avoid having your debts reported to the credit bureau even if you are technically late with some payments.

Avoid the temptation to try to pay for everything with credit cards while you look for your next job. While some emergency purchases may be necessary, paying off all of your bills with your credit cards may only get you into deeper financial trouble if you remain unemployed for longer than a few months. As interest on the charges build, you will likely end up paying far more than if you simply negotiate new terms with your current creditors up front. By taking a proactive stance with your finances, you can reduce the damage to your credit score, and maintain your financial health while seeking new employment.

Good Debt

The term ‘good’ debt applies to almost any type of credit or loan that helps you to make tangible progress in some way. They may be secured loans, such as for a mortgage or a car loan, or they may be unsecured, as in the case of student loans. In all cases, however, this type of debt demonstrates a commitment, or responsibility that is directly correlated to responsible lending habits. By having a mortgage, you demonstrate stability. Student loans are generally seen as a good thing, as higher education often yields a better job, and thus, an individual who is better capable of paying off his or her debts.

However, you should be careful with this kind of debt, just as you would any other. Falling behind on a mortgage in today’s financial climate can lead to foreclosure and a black mark on your credit report. Student loans that are unpaid will go into default, leaving you unable to further finance your education, along with other detrimental effects, not the least of which being the damage to your credit score.

Bad Debt

So-called ‘bad’ debt isn’t necessarily bad, but like all forms of credit, it should be used in strict moderation. Bad credit encompasses things like credit cards, store credit, and revolving accounts that can be used for purchases of less than essential items. While credit cards are not bad in and of themselves, carrying too many credit cards or too much of a balance on your credit cards can cause your credit score to dip dramatically.

The best advice when it comes to credit cards and store credit is to only use what you need and to keep your balances as low as possible. In this way, you demonstrate responsible credit consumption, and your credit score won’t take a hit from having too much debt on unsecured credit cards.

The Balance

Ideally, you should have a good mix of secured and unsecured credit, which demonstrates both stability and responsible credit consumption habits. As much as 10% of your credit score can be determined by the type of credit you have, so be careful not to open a lot of credit card accounts, especially if you don’t have a mortgage or car loan to offset the difference. You should also avoid going the other route – avoiding credit cards entirely and paying only with cash or debit. If you don’t have any payment history with unsecured loans, some lenders may be reluctant to extend credit on favorable terms.

In general, when considering new credit, ask yourself if you really need it, or if it’s just going to be one more credit card to add to the pile. Taking advantage of a low interest rate to pay down a few balances is more than acceptable, but opening an account just for an introductory discount on purchases might not be – especially if you don’t really need the items you would purchase. Keep your financial goals in sight, and you can take full advantage of both types of credit, while still improving your credit score.

Applying for joint accounts or having a cosigner is nothing new in the world of credit. Generally speaking, the idea is that you benefit from the cosigner’s good credit in order to qualify for your loan. Or, in the case of joint accounts, you share the account with a person whose credit is in good standing. In both of these instances, the aim is to give you access to immediate credit, either in terms of a car loan or credit card account, which you then use to build on your own good credit. This can be effective over the long term, assuming that payments are made on time and the account is kept in good standing.

However, with the current credit freeze in place, trying to build credit in this way can prove difficult, as lenders are reluctant to extend new credit in many instances, and FICO may no longer take into consideration authorized users on an account. Because of this, some individuals are looking at joint accounts in a different light. Rather than using a cosigner to help secure a new line of credit, some individuals ask a relative or other trusted associate to add them to an already existing account that has a solid payment history and a low debt to available credit ratio.

This helps in two ways – the solid payment history on the account is now reflected on the individual’s credit report, which may improve the credit score. And the low debt to available credit ratio means that as the individual pays down his or her own debts, the credit score may improve more quickly. In return, the individual generally agrees not to have access to the account, other than in name only. Ideally, the account in question should have at least two years of solid payment history, and a debt to credit ratio of no more than 35%.

If you use this method to improve your credit score, you should be aware that all the standard caveats apply – and this can become particularly risky if the person whose account you are sharing falls behind on the payments. However, as an authorized user of the account, you may be able to remove yourself from the account in question if it goes beyond 30 days past due. This is different from cosigning a loan, in which case you would be fully responsible for the debt, regardless.

While careful use of joint accounts can improve your credit score, it does not take the place of making timely payments on your own accounts, and you may not see as much of a boost with this method as you would by hiring a credit repair company to assist you with removing erroneous information. However, if you don’t have much credit on your report, and you have a friend who is trustworthy and willing to help you with your situation, joint accounts can help to improve your credit score and help you to qualify for credit in your own name. Just remember to monitor your credit report regularly, and make certain that you are free to drop your name from the account without penalty when the time comes.

Marriage generally brings with it the mingling of finances. Joint checking accounts, savings accounts, and credit cards are not uncommon. And while most people work to try to divide their assets, some forget the equally important step of dividing up the debts. Unfortunately, joint account liability is not dissolved along with the marriage. Any debt that you’ve accrued as a couple remains the responsibility of both parties, even if a separate payment agreement was reached.

What does this mean? In its most extreme terms, it means that you can be responsible for purchases your ex-spouse makes on a joint account, and vice versa. This is true even if the purchase occurs after the divorce is finalized. For this reason, it is essential to get all the jointly-held debts in order, and either close the accounts, or put a freeze on any new spending so that one ex cannot take advantage of the other.

If one spouse has no separate payment history on his or her credit report, a divorce can cause that person’s credit score to drop dramatically. It’s important to take measures to secure individualized credit as well as joint credit in order to make certain that your credit history is strong, regardless of what happens in the future. Unfortunately, this often happens too late, and the spouse with the least amount of credit history usually has to seek help from credit repair specialists in order to get his or her credit score back to a reasonable level.

Still, there are some things you can do during the divorce process that will minimize the potential for detrimental effects, assuming that you and your ex-spouse are able to work together for your mutual benefit. The first step, if possible, should be establishing at least one or two lines of credit in each individual’s name, while any joint accounts in good standing can benefit each individual. After this, the second step should be closing all joint accounts – this includes credit cards, checking and savings accounts, dividing up the assets and debts fairly. Use some of the cash you receive to pay down your portion of the shared debt and then use the rest to open a checking or savings account in your own name.

While nothing can truly make the divorce process easier, by paying careful attention to your credit and credit score throughout the process, you can prevent some of the more common pitfalls facing couples who are in the process of getting a divorce. With attention to detail, and a willingness to compromise, both parties can come out of the process with minimal damage to their credit scores.