CREDIT » CREDIT REPAIR & REPORTS

With so many economic worries abounding, consumers should make tending to their financial health their number one New Year's resolution. By being committed to maintaining low balances on your credit cards, as well as paying down high credit card debt in general, you can decrease your credit utilization ratio significantly and raise your credit score in the process.

The revised FICO credit scoring system for 2009 are weighted heavily on the amount of available credit you have versus what you are actually using - this is the ultimate definition of credit utilization ratio. Experts advise to tap only between 10% and 30% of your available credit. Maintaining your balances will help you improve your credit score.

The best way to achieve a better credit utilization ratio isn't through a confusing series of payments, or as some websites advice - a "round robin" payment schedule. Simply charge less and pay off your existing credit card debt in a timely and structured manner. By following a healthy budget strategy - paying your bills on time and living within your means - you should be able to see improvements on your credit score.

Just the difference in credit scores is the number one reason why your neighbor may get a great 5.25% rate on a conventional 30-year fixed mortgage while you get stuck paying over 7% over the lifetime of your loan. By sticking to your financial resolution, you too can earn the right to the best credit rates available.

When you get your monthly statement from the credit card company, it includes a calculation of your interest over the period, which is represented as a monetary value. How does the bank come to calculate this monetary value which it charges you an interest? When you acquire a credit card, the interest rate quoted to you is the APR, or Annual Percentage Rate. This interest may be compounded daily, or monthly, and is charged to what is referred to as your Average Daily Balance, or ADB. Most banks use a simple formula based on these two values to determine the monthly interest charged to you.

For example, the bank takes the APR, which is the percentage of interest expressed as a fraction for instance, 14/100 for 14% - times the ADB over 365 days, times the number of days the credit has revolved (for instance, 30 if the interest is calculated monthly. So to calculate your interest, take the APR and divide it by 100, then multiply it by the amount of the daily balance, divided by 365, then take this total and multiply it by the number of days it has been since you made payment on the account. Thus, you will get your monthly interest amount.

If you have different balance segments at different interest rates for example, if a portion of your balance is put toward a cash advance, or a balance transfer your charges can be much more complicated. In that event, when several interest rates may apply, the allocation of payment is generally at the banks discretion, and they may allocate your payment toward the portion with the lowest interest first, thus leaving the higher interest balance for instance, the cash advance balance in place to collect more interest.

As the rates and terms may vary, it pays to look into how much you might be able to save by making a credit card balance transfer to a low interest credit card.

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