The real estate blog.

You can’t open a newspaper or watch TV without hearing something about the credit crisis, the housing crisis or the mortgage crisis. Once thought to be contained to only people with bad credit or subprime loans, it’s become clear that it’s not.

In England an online credit card provider just yanked thousands of credit accounts from high risk borrowers. The risk? These borrowers paid off their accounts each month and didn’t pay interest.

Over here Bank of America (BAC) and Washington Mutual (WM) are raising interest rates on customers who pay their bills on time.

CNN reported yesterday -

Consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year. And it’s become a habit for them to spend

more than they have. The overall credit card debt grew by 315 percent from 1989 to 2006, according to public policy research firm Demos.

To compound the problem, fewer people are paying their credit cards bills on time. The percentage of people delinquent on their credit cards is the highest it’s been in three years, according to CardTrack.com.

With banks tightening their standards and the drumbeat of recession getting louder, there’s no better time to grab control of your debt now.Mike Shedlock writes on his blog Congress is investigating some of the horrible practices by credit card companies.

Rep. Carolyn Maloney (D-NY), would change the way most credit card companies do business and provide significant consumer protection for every cardholder.

“In recent years the playing field between credit card companies and credit cardholders has become very one-sided,” Maloney said. “A credit card agreement is supposed to be a contract, but what good is a contract when only one party has the power to make decisions?”

The Credit Cardholders’ Bill of Rights Act of 2008, known as H.R. 5244, would protect cardholders from arbitrary interest rate increases and unfair fees.

I understand that even if you pay it off every month, having a credit card is just part of 21st century living. From buying airline tickets to online purchases, electronic money is a requirement. Renting a car without a credit card is nearly impossible. We don’t have to be slaves to big lenders though.

Think about it this way, most credit card providers have other financial services they want you to become a customer for. Credit cards are the entry level to signing you up for a checking account, or an auto loan, even a mortgage down the line. These big lenders are cutting off their nose to spite their face by raising rates or closing accounts for their most responsible customers.

Consider my friend I told you about last week who had WaMu raise his interest rate. Guess where he has his checking and savings account? WaMu. Guess what he did after getting the rate increase? You got it. He closed all three accounts.

I found myself in a similar situation earlier this week. I’ve kind of ignored my credit cards for a while, but I made it a goal to pay them off this month and I did. During this process, I looked at what my interest rates were. They were shocking. So I called one company, Capital One (COF) and asked them to lower the interest rate. They complied and lowered it 6%. It’s fixed for two months and then goes adjustable with the index being LIBOR. Good! Short term rates are going down.

My other credit card company wasn’t so accommodating. First of all HSBC’s (HBC) customer service is in India and as nice as their people are, sometimes the communication just isn’t there. I asked them to lower the interest rate as well on my two accounts. They did not comply and I closed the accounts.

CNN noted -

If you’ve been a good customer and you have good credit, now is a good time to negotiate for a higher credit limit or to knock some points off your interest rate, says John Ulzheimer of Credit.com.

Also, don’t close old credit cards accounts. Even if you don’t use them frequently, it looks better for your credit score if you can show a long credit history, said Ulzheimer.

Theoretically, I should have kept those HSBC accounts open, but they have a hefty annual fee on each one and it’s really annoying having to call India twice a year to beg for them to be taken off. I’m not even sure if they’ll do that anymore and I didn’t want the hassle. Besides, the credit lines were small and I’ll find another account to replace it.

This leads me to my point. If you’re trying to pay off debt, eliminate credit or just restore your financial health, here are three things to remember to make sure you don’t make mistakes that could cost you higher mortgage rates should you buy a home or refinance.

1. Don’t close revolving accounts unless there is a compelling reason to do so. Your credit score is partially calculated by how long you’ve had the account. Old accounts with no balance and no maintenance fees are an asset for your credit.

2. You only need three credit accounts to be considered for a mortgage. Of course, if you’ve got a mortgage already, that counts. Avoid opening new accounts, especially if you’re trying to buy a house. If you need/want to close excess accounts, close the newest ones you have.

3. Pay your bills on time. This is perhaps the easiest and most beneficial step to maintaining a good credit score. I know it sounds easy, yet millions of people pay at least one credit impacting bill late each month. The experts advise you to automate payments so you don’t forget to pay.

The credit crunch is making a lot of people think about their finances. Hopefully this new awareness will get people to pay down debt and save more.