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APR Attack!

Dear Fool,

I had a balance on my Fleet Visa of $2,000, which in two months I paid down to $500. I received a letter from Fleet stating that the terms of my credit agreement were null and void (with little explanation). It indicated on the back of the notice that I could contact a credit bureau to get a copy of my report. When I called Fleet, they told me that my 9.99% rate was being increased to 14% due to information on my credit report. I have had the Fleet card for four years, never been late with payments, always paid more than the minimum, and have tried to always pay the full amount off each month. The flaw on my credit report was from a medical bill in the amount of $131 that my insurance had not paid, and it was turned over to a collection agency. How fair is that? All of my fixed and revolving accounts are in excellent standing. -- Renee

Hi Renee,

For the most part, it sounds like you have been an upstanding card-carrying citizen. Still, that doesn't protect you from the lending industry's dirty little practice of raising your interest rates. To remain profitable, many lenders have started to raise interest rates based not on your history with them, but based on your payment history or credit activity with other companies.

Fair? Maybe not. But it is completely lawful for them to do so at any time.

Your cardmember agreement (you know, that leaflet written in microscopic type in the acceptance envelope with all the deals for rental cars, hotels, and "Kittens in a Basket" porcelain figurines?) spelled out Fleet's freedom to raise your interest rate at any time. When you signed the card and activated the account, you agreed these terms, like it or not. It's not just a Fleet practice, either. Pretty much every lender has that clause built into the contract.

That said, you still have several avenues of recourse:

1. Pay off your balance as quickly as possible and then resolve to pay your balance in full every month from now on. That way, the interest rate doesn't matter.

2. Roll your balance over to another lower interest rate credit card if you are not able to pay it off soon. (See if The Motley Fool Visa is competitive with other offers you see.) However, you might want to keep the Fleet card line of credit open, especially if it is one of your older accounts. Older accounts help establish a long credit history. So if you roll your balance over, pay it off ASAP, then cancel the new card.

3. As soon as you resolve the medical bill, you can dispute the red mark on your credit report directly with the credit bureau(s) that are reporting it, and the entity that is sending you the bill. It's best to see what is on all three of your major credit reports so you can look at your borrowing potential under the same harsh lens the lending industry uses. Our partner True Credit is offering its 3-in-1 credit report and credit score for $29, which is one of the best offers I've seen.

4. Wait it out. Most dings on your credit report will disappear after seven years. The good news is that it doesn't take that long for lenders to consider it old news. Your more recent good credit behavior weighs much more heavily in your favor than one blip a few years ago.

Keep up the good habits, and this will soon be but a "Fleet-ing" memory.


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