Don't let credit card debt ruin your credit score
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Not only do we tend to spend more in the days leading up to Christmas, but we also may get over-exuberant with our spending after the holidays. It’s easy to lose track or get carried away with eating out, stocking up for large family get-togethers heading for the New Year - and even taking advantage of post-Christmas sales that seem too good to pass up. But maxing your credit cards as the year closes can mean your credit score will take a beating in 2016. Here’s what you need to know.
#1 Don’t fall for store card offers
During holiday months, stores get very aggressive about pushing their branded credit cards. They do this by offering discounts, coupons and other incentives. Opening these new lines of credit can ding your credit in many different ways. First, private store cards usually carry a higher rate of interest than do VISA and MasterCard lines of credit.
Second, part of your credit score calculation is the average age of your credit history. Taking on several new accounts drastically lowers the average age that can drop your score. Third, because of the higher interest rates, you’ll end up paying more overall for what you purchase that can greatly outweigh any discounts or incentives and can get you in over your head.
#2 Keep your balances at one-third or lower on primary cards
In addition to avoiding setting up new accounts, you should monitor your spending on existing accounts. You should never carry more than 30% month to month in total revolving credit based on your limits. What this means is that if you have five cards, each with a $2,000 limit, your total limit is $10,000. You should never carry over more than $3,000 month to month.
Better still is never to charge more than you can pay off in full each month. But if you must carry over, keep it to less than one-third of your total revolving lines or else you will see your credit score plummet. What’s more, the greater the balances you carry percentage wise, the more likely you are to miss payments, pay excessive interest and end up in serious financial trouble.
#3 Pay down your holiday charges ASAP
If you have a Christmas bonus coming, consider putting it towards your credit card balances if you have run up your cards in excess of 30% of your credit lines, paying them down until you hit the threshold is critical to protect your credit score. Even if you didn’t have a year-end windfall, prioritize eradicating most of your credit card debt as soon as you can.
And once you conquer your credit cards, try not to run them back up. One helpful tip is not to carry them on you. You may want to keep one at the back of your wallet for emergencies, but stash the rest in a safe place at home so you won’t be tempted to use them. In most cases, by the time you get to your credit cards, the urge to splurge should have passed.
Credit cards out of control?
If you have amassed more credit card debt than you can manage, this can ruin your finances. Are you only able to pay minimum balances? Are your cards maxed out? Are you getting calls from credit card debt collectors every day? Are you living paycheck to paycheck? This does not have to be your life. Chapter 7 bankruptcy can completely wipe out credit card debts and give you a fresh financial start.
Contact the Law Offices of John T. Orcutt for a free North Carolina bankruptcy consultation today! Call +1-919-646-2654 for a free appointment at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington. Don’t live stuck in debt – we can help. Be debt free by the New Year – call today.