Although we've made great strides in educating consumers as to the ins and outs of credit over the last few years -- how credit reports work, how to get and understand your credit score, and how to pay off credit card debt smartly -- many people still don't understand the intricacies of the plastic they may use on a daily basis.

Much of this is due to the credit industry itself, which thrives on ensuring people use plastic for almost every purchase without knowing why. Much of it is due to poor financial literacy and education provided by parents and schools. And much of it is because these things are just naturally confusing.

So with that in mind, here are some of the questions I get asked most frequently:

Q. I have debt on a few different credit cards, and/or debts from auto or student loans. What should I pay off first, and why?

A. These represent two kinds of debt -- secured and unsecured. Unsecured debt is debt that isn't backed by anything and can be a lot riskier for lenders, while auto, home, and some personal loans are considered secured debt, because they're backed by material assets like your house or car.

Because unsecured debt is riskier, it tends to carry higher interest rates, so the longer you let that pile up, the higher your interest will go and the longer it will take to pay off.

Although it may seem intuitive to pay off your smallest debts first and get them out of the way, credit expert and "CreditBloggers" author Emily Davidson argues that you should go after the largest debt with the highest interest rates first.

"Consumers don't need to worry about paying off low-interest accounts like auto, home and student loans until they have all their other debts paid off and have built up some savings," Davidson told These loans help boost credit scores and are relatively inexpensive to carry for long periods of time."

"Let's say someone has a credit card with a $5,000 balance and a 20% APR (Annual Percentage Rate), another credit card with a $2,000 balance and a 12% APR and a $10,000 auto loan with an 8% APR," Davidson said. "They should pay the minimum due for each account every month and then put as much as possible toward the 20% APR card. When that account is paid off, move on to do the same with the 12% card."

Q. I've paid off my credit card(s) and don't plan on using them again. Should I cancel them?

A. Credit experts are divided on this question. Some, like Davidson, feel that canceling unused accounts harms your credit score, because it reduces your overall access to credit, which is one of the factors used in calculating your score. Lots of open accounts with no balances, or very low balances, indicates someone who is financially responsible enough to have credit but not use it too frivolously.

Others feel that too many open accounts leaves you open to identity theft, as thieves can get access to your information and start making charges on credit accounts you may have forgotten about. Your best bet is to cancel things like store credit cards or gas cards, and retain credit cards, but keep your balances clear or minimal.

Q. How many free credit reports can I get in a year? I'm told you can get one or three. Which is it?

A. Both. All Americans can now order free credit reports directly from the three major bureaus--Equifax, Experian, and Trans Union. You can order one report from each bureau per year, for a total of three. So you can order a report from Equifax, one from Experian, and one from Trans Union.

Your best bet is to stagger your orders to get one every four months, in order to track progress you've made in paying off loans and checking for changes to your information.

The only legitimate place to order your free credit reports is from the Web site, calling 877-322-8228, or filling out the Annual Credit Report Request Form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Other sites may advertise "free" credit reports, but look out! They may also trick you into paying for credit monitoring services you don't need.

Q. Will "opting out" of credit offers hurt my credit score?

A. "Opting out" enables you to stop receiving prescreened offers for credit in your mailbox. These prescreened offers are from companies, creditors, and banks that conduct inquiries into consumers' credit on a regular basis. Inquiries that you make for credit are considered "hard" inquiries and may hurt your credit score if you make too many in too short a time, but prescreened offers are "soft" inquiries and generally have no effect on your credit score directly, and neither does opting out of receiving them.

Lenders such as Capitol One often blitz consumers' credit accounts with dozens of inquiries in short spans of time. These offers often end up in the wastebasket, which in turn can increase your vulnerability to identity theft, as crooks "dumpster dive" to get access to your information. This can hurt your credit if thieves open up accounts using information from unwanted credit solicitations, so it's best to restrict credit inquiries to the ones you make yourself.

To opt out of unsolicited offers, visit or call 1-888-567-8688.

Q. My bank just reduced my credit limit and charged me a late fee, even though I paid my balance on time! Can they do that?

A. Unfortunately, yes. That small fine print on the back of your credit card agreement -- the "terms and conditions" -- can be changed at will, any time the bank likes, with no previous notification.

Credit card agreements are notorious for being written in such dense, complex terms that Senator Carl Levin (D-MI), who recently chaired hearings on abusive credit card practices, said they were written at a "twenty-seventh grade level." These agreements can be used to justify levying fees of almost any kind, changing your credit limit, increasing your interest rate, and so on.

Consumer advocates have lobbied Congress seeking greater transparency in credit card fees and writing credit card agreements on an eighth-grade level, clearly enumerating the terms and conditions of the agreement you're getting into when you sign up.

Q. The interest rate and penalty fees on my credit cards is killing me! How can I lower them?

A. The crippling interest rates on many credit cards comes from lenders being based in states with lenient laws governing lending, such as Delaware and South Dakota. It can be nigh impossible to pay off even a moderate balance with an interest rate of 29 percent, but there are ways to ease the burden slightly.

Lenders compete furiously for new customers, so try negotiating with several banks to open new credit cards and take advantage of low introductory interest rates. This won't help you pay off your debt completely, since you're just transferring it from one card to another, but it can net you a low interest rate for a brief period of time that can help you pay off that balance faster.

Be careful -- once that "teaser" rate's period is over, you may be in even worse straits, so do your research thoroughly to make sure you get the best deal.

Telling your bank that you're considering transferring your card balance to another card can also entice them to lower your interest rate or waive penalty or late fees. This can be risky, as it often depends on the bank's policies and the attitude of the customer service representative you're dealing with.

One customer representative for a major credit card company said, "I waive a lot of late fees and overlimit fees and credit back residual finance charges quite often. The girl who sits next to me almost never gives back full fees, but likes to offer to fix half of the problem."

Your own income and credit history can also determine your likelihood of scoring a better interest rate.

"If you have a long, good history with the company, they're more likely to be flexible with you," the representative told "Same if you're a new customer. But if you've been with them for only a year and a half and you've made three late payments, you're probably screwed."