Nov 28 2007
It’s Not Just About Pumpkin Pie!
This holiday season; don’t just worry about expanding your waistline but also expanding your credit waistline! There are several traps it is easy to fall into during this spending season. But there are some tips you can follow that will help you avoid these pitfalls and keep your credit rating in good shape all year long!
Pay with cash! It is easy to go into credit card debt this time of year that can then haunt you for years to come. Did you know that if you run up $5000 in credit card debt and only make the minimum payment, based on the interest rate it could take you 46 years to pay off that debt? And you will have paid over $18000! If you do have to use credit cards, be sure you have the cash available to pay it off at the end of the month or at least be able to pay a good portion of it off.
“If you apply for our credit card today we’ll give you 15% off of your purchases.” Sounds like a great offer, right? Wrong. We’ve all been there. Go into any department store and some person carrying a clipboard follows us around and speaks those exact words. Why is this a bad idea? First, it will create a revolving inquiry on the consumers credit report. If a consumer already has several credit cards, a new credit card inquiry could have a negative impact on a credit score. Second, it will show as a new revolving account. Any time a new account appears on a credit report, it will, at the onset, have somewhat of a negative affect because there is no history on it. Third, it will most likely be maxed out because all the Christmas shopping was done with it. Optimally the bureaus don’t want to see any revolving debt with a balance over 30% of the high credit. Once a consumer goes over that amount it starts to hurt and the higher the balance the more it hurts.
So once all the shopping is done, the stockings are hung and the presents are wrapped the next best thing to do is to pay the bills on time. One 30-day late payment can have a very negative impact on a credit score. Many consumers believe if they pay their mortgage, auto, and student loans on time, that is enough. It is equally important to pay all credit card payments on time, including store cards. One late on even a small department store card can lower a credit score up to 100 points or more!
In reality it takes very little to create and maintain a good credit score. The perfect portfolio for a good score would be:
* 2 installment loans with balances
* 3-4 revolving accounts with balances less then 30% of the high credit
* 3-4 revolving accounts with long histories and no balance
* No collections, late payments, or public records
This holiday season let’s remember: everything in moderation – not only for our waistlines but for our credit waistlines as well!
Happy Holidays!
Mindy Leisure and Jim Kaiser
Advantage Credit Inc. of Colorado www.advcredit.com
mindy@advcredit.com
jim@advcredit.com
Another good article, my sister was here over the holiday, just a farm girl from Kansas paid cash for all her Christmas shopping in Cherry Creek Mall.