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Improve Your Credit Score With These Simple Secrets

A look at the credit scoring system and how you can make it work for you

For example, the Credit Card Accountability, Responsibility and Disclosure Act, also known as the Credit CARD Reform Act, went into effect in 2010. Among other things, it prevents credit card issuers from retroactively increasing your interest rate, unless you've been 60 days or more late paying your credit card bill.

Also, the CARD act requires your credit card company to give you 45 days' notice before an interest rate hike, up from 15 days' notice. You can legally reject a rate hike and close the account. Under this scenario, you would have the right to pay off the debt over five years at your original interest rate.

If you don't close the account, and you accept a rate hike, it's important to know that there are limits on how long banks can impose so-called "default rates" (i.e. higher interest rates) after you've been late paying a bill.

Under the CARD act, default rates can only be charged for six months, provided you pay your credit card bill on time during that period. After six months, your credit card issuer must restore your rate to its previous level.

When it comes to your credit rating, though, a late payment can haunt you a lot longer. The Fair Credit Reporting Act allows negative information (such as late payments) to be included in your credit reports for up to seven years.

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and a regular contributor to AARP. You can follow her on Twitter and on Facebook.

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