6 Steps to Better Credit

If you are resolving to hop off that debt treadmill or get your credit in order in 2006, here are my tips to help you succeed:

1. Review your statements

If you have run up larger balances than usual, your credit score may take a dip after the holidays. And that could trigger an increase in your interest rate on your major credit cards. Check your statements to confirm your rate. If it's higher than you think you deserve...

2. Check your credit report if you have not done so in the past year.

Go to AnnualCreditReport.com to get your free annual credit report from all three major agencies.

3. Clean up your credit

Dispute errors or incomplete information. Credit reporting agencies must investigate within 30 days to confirm the item or remove it. Some credit repair firms like to initiate disputes around the holidays in the theory that they are more likely to fall through the cracks. It's a bit questionable whether it will work with technology today, but may be worth a shot. Another tip: Don't close all your old accounts, or your credit score may drop.

4. Ask for a better deal

Credit card companies will be salivating over consumers' after-holiday credit binges. Now is the time to ask for a lower rate or threaten to take your balances to another card. Be polite but persistent. The squeaky wheel will save money! DebtSmart.com’s Scott Bilker is the expert. Take his advice!

5. Create your exit plan

If your debt levels are creeping up, look at your options for paying it back this year. If you can do it yourself, create a rapid repayment plan and target the highest rate debt first. If you need help, talk to a reputable non-profit counseling agency or consider debt settlement or bankruptcy.

6. Shred!

As you start preparing for tax time, cleaning up records etc. make sure you shred documents containing personal information. Consider using online services to review statements and pay your bills. Research by the Better Business Bureau has found that consumers who are using online services to review and pay bills experience one-eighth the fraud losses of those who rely on paper statements.