9 ways to avoid the subprime spillover problems
The tightening of credit in the mortgage world has had limited effects so far among credit card issuers, but there are ways to make sure it won't hit you at all, experts say.
- Don't be late on your credit card payments. Not once. Not for a moment. Make at least the minimum payment on time. "For people who have good credit, they definitely need to maintain it," says Harrine Freeman, owner of a credit repair business and author of "How to Get Out of Debt: Get an 'A' Credit Rating for Free Using the System."
- Pay off your credit card balances as soon as possible. "Credit cards are convenient. They are a great thing to have and use. But they should not be considered a tool to use to live beyond your means," says Andrew Housser, co-CEO of Bills.com.
- Check your credit score and make sure it's accurate. Half of Americans have credit scores below 650, putting them in a high-risk lending category, according to Freeman. The FICO score used most often by lenders costs $10 or more, but you can get an accurate estimate with the CreditCards.com Credit Score Estimator.
- Comparison shop for credit cards as you would for a big-screen TV or a cell phone. Only 39 percent of Americans shop for credit cards, according to a survey commissioned by CreditCards.com. "The market is still extremely competitive for good borrowers," says Diane Swonk, chief economist at Mesirow Financial. "Credit cards are commodities. If you don't want to switch processors to get a better deal, press your existing provider."
- Pay attention to your credit card interest rates. Fifty percent of Americans say they don't actively manage the interest rates on their cards, according to a 2007 CreditCards.com survey.
- Don't ignore your credit card woes. If you've run into trouble, contact your credit card issuers, seek help from a credit counseloror weigh bankruptcy, depending on the severity of your circumstances. More than 80 percent of Americans acknowledge credit cards are an easy way to wade into debt, according to the CreditCards.com survey.
- Negotiate a deal with your mortgage provider if you're facing default. "They would rather cut your rate rather than take a foreclosure," Swonk says. "This is also the only way you will ensure a more reasonable credit card rate down the road."
- Set a budget for household expenses -- and stick to it.
- Start an emergency fund that will cover your household expenses for three to six months.
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