Profit in 2008: Your savings, your credit
How to get the best deals on home loans, credit cards and your bank accounts.
(Money Magazine) -- Lending standards will be tighter, credit-card deals skimpier and savings rates will remain in a holding pattern. These moves will help you nab the best borrowing and savings deals next year.
Shore up your score
To get the lowest rates on loans, you'll need a higher credit score next year. Put it this way: 750 is the new 720.
The quickest way to boost your score? Pay down the balances on your credit cards and home-equity line of credit.
The ratio of debt used to available credit counts for about a third of your score; get that ratio under 10% and you could raise your number by 50 points, says credit expert Gerri Detweiler.
Also check your credit reports for errors (you're entitled to one free report a year from each of the credit reporting agencies at annualcreditreport.com). One in four reports contain a mistake serious enough to result in a denial of credit.
Make your own deal
Next year, 0% introductory-rate offers and low-interest balance transfers are likely to get scarcer. Lock them in while you can.
Blue from American Express, for instance, offers a 4.99% rate on transfers until you pay off the balance and an introductory 0% rate for up to 15 months, depending on your credit standing (after that the variable rate jumps, recently to 11.74% for cardholders with top credit scores).
Unfortunately, you'll have to pay a fee of 3%, up to a maximum of $99, to transfer that balance - standard practice in the industry.
But many issuers are willing to negotiate a lower fee (or eliminate it altogether) if you have a large balance to transfer and a credit score above 720 or so. They won't publicize that fact, though; you have to call and ask.
Try a little variety
Economists expect savings rates a year from now to be about the same as they are today - or maybe a little lower...or higher.
What's the best way to deal with the confusion? Divide your savings among cash accounts and CDs of varying maturities.
Put some money in a one-year CD to lock in a higher yield (the best of the bunch were recently paying around 5.5%). Keep the rest in six-month CDs (tops in that category: around 5.2%) and money-market funds (recent average: 4.6%) to stay nimble if better deals come along later in the year.
Another good option: short-term bond funds, which offer investors an opportunity for a little price appreciation if interest rates drop, in addition to yield (4.7% recently).