You see them all over the Internet; those enticing little links challenging you to test your brainpower with an IQ test. While entertaining for sure, you don’t really learn anything more than how well you take an IQ test — and possibly that your teenage cousin is way smarter than you. Ouch. Personally, if I put the time in, I want something more applicable to the real world out of it. Take for example the FreeScoreQuiz.com site, brought to you by Freescore.com. There, I tested my knowledge of the credit-scoring world and actually learned something about what makes it tick — which in this credit-crunched economy is more important than ever.

Funny little Filbert the Squirrel of FreeScore fame happily guided me through a series of questions designed to test and educate me about the ins and outs of the credit community. A little understanding of what are and are not positive credit practices goes a long way to helping me improve my score.

We all know (or some of us do anyway) that a poor credit score and battered credit history can raise your interest rates, cost you a mortgage and even stop a home purchase dead in its tracks. But FreeScoreQuiz.com — and of course, Filbert the Squirrel — revealed just how far into other areas of life a low credit score and less than stellar credit history can reach.

I got a little tripped up on a question asking who exactly has access to my credit report — apparently employers, landlords, and even insurance companies do. Who knew a few late credit card payments could hurt my chances at landing a job or getting a new apartment? Well, apparently Filbert the Squirrel did. And now so do I.

Even if you think you know it all, it’s always good to take a second look. Who knows you might learn something new? I know I did. And when I forward FreeScoreQuiz.com to my bratty… I mean brilliant cousin, hopefully she will too. And with any luck she won’t make those college-age credit mistakes that could kill her credit score years before she even enters the real world.

• Scarce but available credit. That’s right, my crystal ball tells me that 2009 will be a tough year, but you don’t have to be an expert to figure that out.  Many of us either experienced, or know someone who’s had some experience related to, the tightening of credit in the last few months.  When the credit crisis was in full swing, I spoke to the owner of a car dealership who told me that he was probably going to have to lay off half of his staff.  Not only did sales drop because people didn’t want to make such a big purchase, but even those who wanted to couldn’t get a loan approved. In September, October and November, his sales were 40% of what they should have been.  The good news is that the credit crisis has started to lighten up, and it’s expected that things will get better in the second half of 2009.  Credit will still be tighter than what we’re used to seeing, but it will be available to those with excellent and good credit.  For those who have marginal credit, the situation will be more bleak, but they too will find a few options — just not nearly as many as they had prior to the credit crisis.

• Increased interest rates. Credit companies, particularly credit card companies, are hiking rates at any opportunity.  Though you might think that they wouldn’t want to make it more difficult for people to make their payments, it seems as though the losses that credit card companies are taking is driving them to hike rates wherever possible.  Expect more of this in 2009.  If you miss a payment, that great rate you had will be gone; if you go over the limit, same thing.  And if you haven’t had a rate hike in quite a while, well, expect it.  In 2009, chances are you’ll see your rate increase.

• Traditional lending practices return — it’s not a circus anymore. Remember those crazy real estate loans that your friends were getting — nothing down, interest-only payments, etc.?  Well, those days are gone, and I have to be honest, I’m happy about it.  The circus is over, and it’s time to return to a more traditional and reasonable approach.  For those who had some difficulty in making reasonable decisions when it came to selecting acceptable loan terms and ended up buying more house than they could afford — well, help is on the way.  Kind of.  Those types of terms won’t be offered in 2009 and perhaps never again.   Lenders took a little bit of the heat too, and you can expect that lenders will have a more conservative approach in 2009.

If you find yourself in this number, don’t be afraid to face it and make changes to your lifestyle in order to reverse the trend. Here are a few tips for digging yourself out:

• First, stop taking on new debt. Adopt the outlook that you’ll begin to work your way out instead of running from the crisis.

• Next, make real, long-term changes that will help you. Begin to pare your lifestyle back by eliminating unnecessary expenses. Bring your expenses under control, and under the level of your income. And, yes, you’ll have to begin to live by the “b” word — budget.

• Third, look for ways to increase your income. Take on a part-time job to bring in extra cash. Sell some things in your house that you no longer need, then use the money to pay off debt.

• Finally, don’t hide from or avoid your creditors. The mere fact that more and more consumers are having problems has forced these organizations to face the facts and begin to try to help them deal with the issues. For example, one consumer recently found himself falling behind on an automobile loan and unsecured personal loan, and contacted the creditor about his problems. He found more than just a listening ear. The company gave him a sixty-day payment-free period to get caught up on both loans. These companies realize that they had better begin to offer these types of programs rather than have the customer default on the loan. The latter will cost the company much more money than just helping them get through it.

Take these tips, and take control of your credit. Slowly but surely, it will begin to improve.

Here’s what can happen: Your credit score is determined in part by the difference between the credit limit on your cards and the balances you carry (also known as “credit utilization”). Virtually all credit card issuers report your credit limit to the credit bureaus, and this is used in the calculation of your score.

The problem is that a no-limit credit card company has to report some value as the “limit” to the credit reporting companies. If card issuer reports an arbitrary limit that happens to be low while also reporting what you spend (and you spend a lot), you could seeing a lower credit score because of it. The difference between your credit limit and the “balance” could be very small (which is bad for your credit score).

Many consumer advocates believe that the best thing for the no-limit card issuers to report is your highest-ever balance as your actual credit limit. Unfortunately, it seems like this doesn’t always happen, and the unsuspecting consumer may have a lower credit score than might otherwise seem fair.

The only thing you can do is get your credit report and see what the card issuer is reporting. If it looks like they’re doing this to you, call customer service to complain.

• Having the ability to reserve hotel rooms, travel accommodations, or restaurants by phone or Internet
• Having the ability to make a purchase by phone or Internet to take advantage of special online deals or to avoid having to run out to the store unnecessarily
• To benefit from rewards programs for frequent travelers, get cash back on purchases, or receive merchandise in exchange for responsible credit card use
• To pay for unexpected, necessary expenses that would drain our financial resources over a few months, rather than having to borrow from a friend or take out a loan

When a credit card is used responsibly, the cardholder only charges what he or she can afford to pay off in the same month the transactions occur (with the exception of those occasional, necessary larger purchases that you pay off in a few months).

In the study, AmEx took best credit card for the Rewards, Fees and Rates, and Customer Service Call Center categories. Interestingly, American Express is most often used by cardholders who pay their balance off in full each month rather than carry a balance from one month to the next, which explains why the card would probably receive top scores in the fees and rates category. It also makes sense that cardholders who are paying their credit card balances in full each month would generally receive higher rewards from rewards programs and have higher overall satisfaction with their credit card in general. If you aren’t carrying a balance on a credit card, you aren’t paying interest or fees on that balance, you’re getting more rewards for less money, and you’re not watching your credit card payments get eaten by the interest and fees applied to many cardholders who carry balances.

For individuals who tend to carry a balance on their credit cards, Discover Card was considered the best credit card, thanks to cards with no annual fees and interest rates that were considered low among this group of credit card users.

Regardless of whether the cardholders in the study were considered transactors or revolvers, one aspect stood out as being extremely important to them: credit cards with good customer service. Having a twenty-four hour call center available to take cardholder calls and answer questions or solve problems was important to all cardholders, regardless of how they pay their balances. American Express took best customer service credit card, followed again by Discover Card; Chase was ranked third.

Now that we have the bad news established, let’s focus on some positive things — like a few tips that you can use to improve your credit score. And just so I’m clear, the economy doesn’t have to tank for these tips to be of use to you. Your credit score is your credit score, and for the most part, how it’s calculated doesn’t changed based upon the rise, or fall, of the economy.

Your credit score is broken down with approximately 35% of your score being based upon your repayment history and 15% of your score based upon length of credit history. Another 30% of your score is based upon amounts owed (e.g., accounts with balances, amount owing on accounts, etc.), with another 10% based upon the types of credit used and the final 10% based upon any new credit you may have.

With that said, focus on the things that you can do to influence your credit score.

1. Pay your bills on time. Although it’s hard to do if you lose a job, paying on time is very important to keep your score in good shape.
2. Keep your credit card balances low. Don’t use those cards. It’s tempting, especially when money is tight. But keeping that debt-to-credit-limit ratio low will help keep your score in good shape. It will also prevent you from being burned if your creditor lowers the balances on your revolving accounts. For example, if you owe $1,000 with a $4,000 limit, you’re only at 25% of your available balance. However, if your creditor lowers the limit, as some are doing now, then it drives your ratio up and your credit score down. Keep paying down those balances.
3. Don’t open new accounts. Don’t be tempted to go get that new car because you think credit is going to be tight in a few months. If you don’t have to have it, don’t get it. Tighten your belt — in the long run, you’ll be glad you did.

Recessions, especially this one, can be scary. However, by planning ahead and cutting back, you can get through it. If things get sideways, call your creditors, and try to work something out with them. It might not save your credit score entirely, but it will help some and save you a lot of aggravation in the end.

The absolute best tip for finding an affordable loan in a recession is to take the time to shop around. Compare lenders and the interest rates they’re offering, and only apply to the lenders offering the best rates based on your situation. It takes more time than calling your local bank, but if you can get a lower interest rate somewhere else, the money you save over the term of that loan will be well worth the extra effort.

You’ll also want to know what your credit score is before applying. This can save you time and “hard pulls” of your credit report. If you get your score and view your credit history, you’ll have a good idea whether or not you are likely to get a loan. If you’re not likely to qualify, save the hit on your credit score — don’t apply for any new credit until you’ve raised your credit score to a more attractive number.

As of August 5, 2008, subsidized Stafford loans for students originating for the 2008-2009 school year will experience interest-rate declines from 6.8% down to 6%. It’s expected the interest rate will drop to 3.4% for 2011-2012 school year.

According to U.S. Public Interest Research Group, the average four-year student taking out subsidized Stafford loans who starts their college career in the 2008-2009 school year will save around $2,570.

Considering that over 5.5 million students rely on Stafford loans each year to help finance the cost of higher education, the savings are substantial. Interest doesn’t start accruing on subsidized Stafford loans until the student has graduated or left college.

Lower interest rates on Stafford student loans is part of the College Cost Reduction and Access Act of 2007. In addition to providing lower interest rates, the act is also helping students in other ways, including:

Increasing Borrowing Limits

Undergraduates can borrow an extra $2,000 per year through unsubsidized Stafford loans, making the amount available to freshman up to $5,500 in federally funded loans, sophomores up to $6,500 and upperclassmen up to $7,500.

Tuition Assistance to Teachers

For students who commit to teaching in high-poverty communities or subjects that are considered “high-need,” there will be tuition assistance provided to undergraduates.

Complete Loan Forgiveness for Public Servants

Students who work over 10 years as public servants will be given loan forgiveness.

Increased Pell Grant Scholarships

Starting in 2008-2009, the maximum Pell Grant scholarship limit will be $4,731, which is $490 more than previous years.

What difference does it make whether you have a hard pull or a soft pull on your credit, and why should you care? A hard pull will actually reduce your credit score, while a soft pull will not.

Hard Credit Inquiries

Hard pulls on your credit report are the inquiries you want to keep track of and be aware of. They reduce your credit score. When you apply for credit, you give permission to the lender to pull a copy of your credit history and/or credit score, in order to determine whether or not you qualify for credit. When a company checks your credit, the hard-pull inquiry will remain on the report issued through all three credit bureaus for other potential lenders to see for a period of one to two years. Each hard pull will also lower your credit score up to five points and keep it lowered for six months or so! Think about this the next time you apply for credit.

The following situations result in a hard inquiry to your credit report:

• Applications for any new credit; credit cards, loans, mortgages, etc.
• Opening a bank account
• Activation of pre-approved credit card offers

Soft Credit Inquiries

Any inquiry made to your credit report that doesn’t affect your credit score is considered a soft pull. Most of the time, when your credit is looked at, you aren’t even aware that it’s happened! Every time a company reviews your credit history, a notation is made in the file that you can see (but other lenders viewing your credit history or score would not see the soft inquiries made to your credit).

There are a number of situations that would result in a soft pull, including:

• Credit card lenders who make initial credit report checks in order to send out pre-approved credit offers
• Pre-approvals for mortgages and loans
• Any credit report or credit score you request on your own
• Background investigations by potential employers or landlords
• Credit report checks by companies you already have accounts with, including credit card or insurance firms