Confused by your credit score?

If you’ve been reading the Pazit blog, you probably know that we recommend getting your free credit score every three months, each time from a different credit bureau. You can do this easily by logging onto www.annualcreditreport.com. Problem is, it’s often difficult to decipher your credit score.That’s why I’m recommending a new tool called the Credit Report Card from Credit.com.

This FREE tool is similar to a report card — it gives you a letter grade corresponding to your approximate credit score. What’s great about the Credit Report Card is that it tells you how you’re doing in each of the categories: payment history (on-time payments), debt usage (what percentage of your total credit limit you are using; the lower the better), and credit age (how long your credit history is; the longer the better). (It doesn’t ask for credit card information…beware of “free” credit report services that do).

I was surprised to discover that I “lost points” in two categories: account mix (having a mortgage, which I don’t, is a plus); and inquiries (signing up for store credit cards can wreak havoc on your credit score!).

Still, the Credit Report Card isn’t a replacement for getting your free credit reports. That’s because there’s no way to tell whether there’s incorrect information. That said, it’s a useful tool (and is only a soft inquiry, so won’t harm your credit score).

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Good news for credit card users

Would you pay only the minimum balance on your credit card if you received a statement that outlines just how much you’ll be paying in interest on that balance? Probably not. Because then you’ll see that you’re paying nearly three times as much as your original purchase in interest fees alone!

Well, good news. The Senate passed a bill this week that will put an end to the sneaky tactics of credit card companies. No more fees for paying your card over the phone. And credit card companies will have to provide at least 45 days of notice before hiking your interest rate. Plus, credit card statements will have to do the math for you, highlighting just how much it will cost you when you pay only the minimum.

These rules first go into effect February 2010.

The bottom line: Pay off your card in full each month and always check the statement carefully for any finance charges or other fees.

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Action alert: Order your free credit report today

Nearly two-thirds of U.S. consumers haven’t ordered a copy of their credit reports within the past year, according to a recent study by the National Foundation for Credit Counseling. If you’re one of them, take action right now. Just log onto http://www.annualcreditreport.com, fill out your information, and you’re good to go.

(Stay clear of http://www.freecreditreport.com and other imposter sites — the credit reports they offer are not really free! Often, by accessing your credit report, you will unwittingly be signing up for their credit monitering service, which comes with a sizeable monthly fee).

Why bother? It’s important to know how good your credit is, since a lower score will result in higher interest rates when it comes time to take out a mortgage or a loan on a car. These days, employers check your credit to ensure that you’re responsible. So it pays to check your report for any mistakes and know where you stand, credit-wise.

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