Yesterday, I recommended a new way to pare down your credit cards. I don’t want you to cancel them all or use them like crazy to earn rewards. I just recommend keeping two credit cards—the card you’ve had the longest and the card with the highest credit limit. For simplicity (and to protect yourself from going on a spending binge and landing in debt), cancel the rest.

But as one person already commented—banks will cancel your credit cards if you don’t use them. Because you want to keep at least two credit cards open to continue building credit, you want to make sure the two cards you keep stay open. So you should use them from time to time. [...]

The majority of financial advice on credit cards falls into one of two categories:

• Credit cards are evil and you should cancel them and never, ever use them again.
• Credit cards are fantastically convenient when used responsibly and can actually make you hundreds a year in rewards.

Both are wrong.

Been burned by credit cards? It’s tempting to do what Matt did: Close ‘em, shred ‘em, and forget ‘em. If you’re either so mad at the card racket or think you can’t trust yourself with credit, then cancel ‘em. But before you do, consider this: Canceling credit cards makes it harder to maintain good credit. Hope to apply for a mortgage? (Or even an apartment?) You’ll want good credit.

Some money wizards recommend shredding your cards; others say “credit cards are greeeat!” After all, card rewards earn you a couple hundred extra bucks a year. Unfortunately, most rewards-seeking spenders will actually spend more money than they’ll earn in rewards using a rewards credit card. Let’s take a closer look at both of these fallacies. [...]

I know what you’re thinking: “I’m young, I’m Web-savvy, I don’t need to worry about identity theft.” Street smarts alone may not protect you from every identity theft trap; this stuff can happen to anybody! What follows are seven signs that you may be at-risk.

Note: Next week, the National Foundation for Credit Counseling and the Council of Better Business Bureaus will promote “National Protect Your Identity Week”. This article kicks off a four-part series on Money Under 30 featuring simple steps you can take to protect your most precious virtual asset—your identity!

• Today: Seven Signs You’re At-Risk for Identity Theft
• Wednesday: Beware Credit Card Skimmers and How to Spot Them
• Thursday: Beware Phishing Attempts and How to Spot Them
• Friday: Everything You Need to Know About Protecting Your Identity

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Tired of worrying about your credit, and being punished for having a low credit score? The eight steps listed below will lead you to financial freedom. Some are easier than others, but by following even some of them your credit score will rise.

1. Be Patient

This one’s so easy, you don’t actually have to do anything! The older your credit file, the more stable it will be. If you have a proven, positive credit history, lenders will feel more comfortable extending credit to you. Your credit report is an ever-changing file: every time you use credit or make a payment, your credit profile and your score change. That means that any flaws you have in your credit history will disappear over time. Focus on handling your credit accounts in a positive manner and your credit report and score will improve.

2. Don’t Close Old Accounts

Even if you haven’t used an account for a long time, leave it alone; it will only help your credit score. The longer your positive track record and the lower your overall utilization rate (or the amount of credit you’re using compared to the amount of credit that’s been extended to you), the higher your credit score will be. [...]

The CARD Act could go into effect as soon as December. Although legislators passed the CARD Act with Americans’ best interests in mind, the act also means credit card users may see higher interest rates and fewer rewards. And for anyone under 21, the CARD Act will make it much more difficult to get a credit card.

The CARD Act’s Under-21 Restrictions

The CARD Act stipulates that creditors are prohibited from extending credit to consumers individuals (I hate the word consumer) unless:

• the consumer individual has submitted a written application that meets specified requirements and
• the application is signed by a cosigner, including the parent, legal guardian, spouse, or any other individual who has attained the age of 21 having a means to repay debts incurred by the consumer borrower in connection with the account.

What I Think

When I first heard about the under 21 provision in the CARD Act, I said “that’s a great idea”. That’s because I started getting into hot water with credit cards way before my 21st birthday. But as I’ve had some time to chew on the idea, I’m starting to think it stinks. [...]

Today, only four out of ten mortgage applications close. That means 60 percent of prospective home buyers walk away disappointed. For first-time home buyers, that statistic may be even higher. But if your mortgage application is declined, don’t despair. Getting mortgage approval isn’t easy and—like many things worth doing—it may take several tries to get right. After your mortgage application is declined, the first step is to find out why. Once you do, it’s fairly easy to take the steps you need to ready your finances for another go.

There are only so many reasons your mortgage application may be declined. The most common are:

• Your credit score is too low.
• Your monthly debt payments are too high compared to your income.
• You’re applying for “too much house” for your income and assets.

Lenders and brokers want to approve your mortgage (after all, approving mortgages is how they get paid). So if you don’t qualify initially, they should be happy to explain to you why your application was declined. If they don’t offer this information immediately, ask them. Let’s take a closer look at what each reason means and what you can do about it. [...]

Matt, 26, feels it’s time to stop renting and think about buying a home. He earns $48,000 a year at his IT job outside Washington, D.C, he has saved $20,000 he could use for a down payment (and more in his 401k), and he has no debt. And that’s the problem. Today, more and more twenty and thirtysomethings ready for home ownership are discovering their credit history isn’t adequate to qualify for a mortgage. [...]

Credit card issuer Chase rolled out a new feature today—called Blueprint—that will allow consumers to divide credit card charges they want to pay in-full or over time. Blueprint will enable Chase cardholders to pay everyday charges in-full each month interest-free, even while paying other purchases off over time. [...]

A lot of people, myself included, can trace years of indebtedness back to that first student credit card. After all, wielding credit cards when you’re 20 years old with limited or no income is a dangerous game. That said, student credit cards do serve a purpose: They help you build the credit history you’ll need later in life to get an auto loan or a mortgage. If you’re a full-time college student, only consider applying for a student credit card if you understand that you’re using the card to build credit—not earn rewards or borrow money. [...]

A reader working to qualify for a mortgage writes: “I have checked my credit with the three bureaus, and they seem to have all my info up to date and everything looks good. My problem is that on the free credit reports I received (via annualcreditreport.com), I can see everything except my FICO score. Before I go see another mortgage guy, I want to make sure my FICO score is at least half decent. I am willing to pay a nominal fee each time I see it, but I certainly do not want to be involved in monthly credit monitoring programs, which is what everyone wants to sell me.” [...]