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See the first four great, surprising credit repair tips in part I of this series.

Credit repair tip #5: Don't pay off existing card balances with an introductory interest-free card.

"Balance transfers can work in your favor if the interest you save outweighs the transfer fees," explains Leslie McFadden. However, "you have to be careful that you're not running up so much of the new card's credit limit that it's hurting your score." Consolidating your balances can make the credit bureaus think you're maxing out that new card.

Plus, when the introductory interest-free period runs out, you may suddenly find yourself paying an interest rate that's higher than the card you transferred the balance from.

Credit repair tip #6: Don't borrow from your house to pay off credit card debt.

The upside? A lower interest rate and the ability to consolidate your debts into one payment -- usually a lower payment. The downside? Potential for disaster. Do not put up your house as collateral for existing debts. If you can't make your payments for any reason, you could face foreclosure.

In today's economy, with job losses, foreclosures, insolvency and bankruptcy threatening ordinary hard-working people, everyone could use a few tips about paying down debt. The following eight practical credit repair tips are based on how your credit score is calculated, spending psychology and sound reason. Nevertheless, they may go contrary to some concepts most people just assume to be true:

Credit repair tip #1: Use those credit cards.

It's true that using credit cards instead of cash can give you a subtle push to spend more. Nevertheless, you need to use your credit cards for them to be counted positively on your credit report.

Because of the credit cries, many creditors are closing inactive accounts because they're not profitable but still expose the companies to risk. You may not mind losing a dormant account, but credit reporting agencies do take notice.

About 30 percent of your credit score is based on your debt-to-credit ratio, or how much of your available credit you use. When an account with no balance gets closed, it makes that ratio worse and lowers your credit score.

"Now it's use it or lose it," says Liz Pulliam Weston, personal-finance columnist for MSN Money and author of Your Credit Score.

Credit repair tip #2: Don't close your account once you pay off your balance.

The same debt-to-credit ratio rationale applies here, but there's more. Another 15 percent of your credit score depends on the length of your credit history. Closing your oldest account shortens your credit history and can blow that 15 percent.

The Federal Trade Commission (FTC) won a big victory last month. A federal judge ruled that three credit repair telemarketers -- AMS Financial, Rapid Reduction and PDMI -- must shut down their operations.

The three companies, which are based in Washington and Texas, all operated by bombarding consumers with robocalls, even if those consumers were on the National Do Not Call Registry or had specifically requested not to be called. Most telemarketing robocalls are prohibited without a consumer's express written consent.

Worse, the companies promised desperate consumers that they could reduce their credit card interest rates and help with credit repair. The deal they offered was that, in exchange for up-front fees ranging from $499 to $1,590, they would help them reduce their interest rates.

There was no real risk to the consumer, they promised, because if they didn't save at least $2,500 through credit card rate reductions they could "earn back" 100% of their up-front fee.

According to the FTC, their promises were false. Instead of contacting credit card companies and negotiating for lower rates, the three companies simply produced consumer information on how to pay off your credit cards early. The companies also misled consumers about their refund policies, which were strictly limited.

It's good news that regulators are taking notice of credit correction scams, although it is too late for consumers fleeced by AMS, Rapid Reduction and PDMI.

FBI Tips on How to Avoid Being a Victim of Credit Card Fraud

It comes as a surprise to many people that taking on debt can make wise financial sense. Of course, certain types of debt are undesirable, but under the right circumstances, taking on debt can be the first step toward building good credit and putting yourself on the road to financial security.

As a general rule, debt incurred for the purpose of investing in something that will increase in value over time is a positive debt. On the other hand, borrowing money to purchase something that will decrease in value is considered a bad debt. These are somewhat simplistic explanations, but some illustrations may be useful in showing the difference between a good debt and a bad debt.

Some debts that are generally thought of as good debts include: student loans, home loans or mortgages, and business loans. Why? Because these loans are thought to be investments in something that will one day pay off and be more valuable than when originally purchased.

Given the recent events in the housing market, it may seem odd to think of a mortgage as "good debt," but there is another reason these debts are preferable. Interest that accrues on mortgages, home equity loans, and student loans is generally tax-deductible for the borrower.

For many people it is hard enough to build a solid credit rating, but when errors creep into credit reports, it can make it nearly impossible to obtain credit when needed. How common are credit reporting errors? In one 2004 study, nearly 80% of credit reports reviewed had some sort of mistake that could have resulted in a refused loan or other denial of credit.

Obviously, your credit is something that you have to be proactive in monitoring. Fortunately, there are some tools available to help. The Fair Credit Reporting Act allows you the ability to dispute information on your credit report and ensure that it is removed in a timely manner if it turns out to be incorrect.

These challenges to your credit report involve an investigation by the credit reporting agency and the creditor involved. Within 30 to 45 days you should find out if the disputed item will be removed, changed or remain on your report.

According to a report by the credit-rating agency Experian, residents of San Diego County have seen their average credit score drop to an average of 762 to 757 in the last two years, even as their average debt load has increased. For thousands of people seeking credit repair and control over their debt, those two statistics raise eyebrows.

Experian's senior director of analytics, Michele Raneri explains that the average score is down because lenders have cut back on lending, which means that the same amount of debt uses up more of your available credit. How much of your available credit you use is referred to as "utilization."

"Utilization is important because it still reflects how needy a consumer is and potentially shows cash flow problems," she said in an interview with the San Diego Union-Tribune.

The Average San Diegan Owes $24,012 in Non-Mortgage Debt

San Diegans owe, on average, $24,012 in on credit cards, car loans and personal loans, slightly lower than the national average of $24,775. Nevertheless, the average San Diego resident has a credit score of 751 - or a C grade under Experian's model.

These days, your credit score can affect everything, and bad credit starts a vicious cycle: You're overwhelmed with debt, so your credit score drops. Your credit score drops, so the interest rates you pay go up. High interest pushes you farther into debt. To escape this cycle, it's tempting to turn to a debt negotiation or "credit repair" or "credit correction" company.

Usually for an up-front fee, credit repair companies typically agree to contact all of your creditors and convince them to give you a break. Some companies promise to reduce your interest rates or monthly payments - even your total debt. Others promise to "clean up" your credit report so you can deal more favorably with lenders.

It's always good to be skeptical of things that seem too good to be true, of course. Bankruptcy attorneys, consumer advocates and non-profit credit counselors have been sounding the warning about for-profit debt negotiation companies for some time now.

These companies -- especially those that charge up-front fees -- are often mere scams. At best, they are probably powerless to do anything you could not easily do for yourself.

Although bankruptcy has credit consequences, for many people it can be a positive choice. According to Paula Langguth Ryan, author of "Bouncing Back from Bankruptcy," a number of myths exist about credit repair after bankruptcy.

Myth #1: Bankruptcy Ruins Your Credit Forever

A bankruptcy stays on your credit report for seven to ten years -- not forever. Assuming you have no further debt problems, you could very well have a higher score at the end of that period than you do now.

Myth #2: Bankruptcy Means No Credit for Ten Years

In fact, you may start receiving credit card offers immediately after you file for bankruptcy, although they often have very expensive terms and interest rates. As your credit improves, the quality of the offers you receive should also improve.

You are on a mission to repair your credit. Today, you will send in the last payment on your credit card and close out all your debt for good. The smell of a fresh start is in the air and you want nothing more than to cancel all credit cards.

Don't pick up the phone just yet!

While fiscal responsibility (paying off your debt) is by far the most important factor in establishing good credit, cancelling your old credit cards is not necessarily a solid next step. It may feel right, but, in the end, you may wish you had kept those lines open.

Why is this?

Many Californians, in San Diego and across the state, are taking a hard look at household finances and, for many, part of that discussion is credit repair. This is especially true for those who have been forced to declare bankruptcy - whether Chapter 7 or Chapter 13.

In 2009, this was true for more than 200,000 consumers across California.

While filing for bankruptcy can give you a jumpstart in turning your life and finances around, it also affects your credit. This is inevitable, but it doesn't have to be permanent. Luckily, there are many credit repair lawyers, and some credit repair companies, which can help you rebuild your financial state and emerge better off than ever.

Still, for every honest credit repair specialist, there is one or more looking to take you for a ride. As a consumer rebuilding credit history, you have to be very careful with who you trust.