Post-Holiday Credit Card Debt

The Holiday spirit tends to convince many people to overspend on their credit cards, which is a great bonus for the credit card companies and bad for us! Do not let this happen to you. I know it is early to be thinking about the Holidays, but you do not want to be stuck paying large sums of unnecessary interest and fall into debt. If you start planning now, you can use Holiday gift shopping to boost your credit instead of letting it drop. Credit card debt can decrease your credit score and increase your interest rates. This could take years to repair and cost you tens to hundreds of thousands of dollars over your financial lifetime. Do not fall into the Holiday trap. Plan ahead and use these tips to help save you the hassles of credit card debt and a lower FICO score.

Credit Card Benefits

The Holidays are a great way to benefit from the rewards offered by various credit card companies. If you have a rewards or cash back credit card, this is the card you want to be using for your purchases. Rewards cards usually work on a point-based system, allowing consumers to rack up points to later exchange for air miles, merchandise, discounts, etc. Since most people spend more than usual during the months of November and December, rewards and cash back cards are great ways to benefit from Holiday spending. Often times, credit card companies will offer higher cash back rates during these months. So if you are looking for a new card, now is the time to apply. However, you want to stay away from department store offers.

Many stores will offer their own version of a rewards credit card, using the incentive of saving 15%-20% on today’s purchase. But what they really mean is that you’ll save that percentage only to later pay at a higher interest rate than the credit card you already have. Turn down these offers and save yourself the inquiry points and the hassle of another credit card.

Holiday Budget

Determine how much money you can afford to spend within one to two months after charging. For some perspective, make a list of all the people you plan on buying gifts for and write a price range for each person or group of people. That way you can make a comparison of how much you want to spend and what you can afford. Now here comes the hard part - stick to it! Do not overspend, because you will have to pay the money back PLUS interest. The outstanding problem of credit cards is that people get too excited with their high limits and spend as if it were free money. This is especially true during the Holidays, where people focus on gifts and decorations. Know that you can spread Holiday cheer to others without creating a depression in your bank accounts.

The Holiday season can be used to either make or break your credit score. Be smart and spend wisely. If you are already in credit card debt, use your card sparingly and focus on fixing that debt and increasing your score before you go shopping. If you don’t overspend this season, that debt will be much easier to handle in the months to come.

This entry was posted on Friday, November 16th, 2007 and is filed under Credit Card Debt, Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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How Credit Scores Affect Mortgage Applications

With a good credit score an applicant will receive prompt response from many lenders, all of them offering low interest rates and low down payment options. The loan amount offered also may be high. On the contrary a low credit score would result in a lot of rejection from various mortgage financers. Because creditors wouldn’t come forward easily to give credit to individuals that have a history of difficulty in repaying existing loans. After all, creditors take risk when they finance mortgages against the credit history of a debtor. Naturally, they will wish to remain on the safe side and pick up less risky ones that have good credit histories. A good credit score means less chance of missing on payments and therefore less risky.

But there are some real risk takers that will come forward to finance mortgages for individuals with bad credit scores. They would charge high down payments and always high interest rates though. They may also fix additional charges for every little paper work and may charge high closing rates. The loan amount offered will also be considerably less. The individual with poor credit scores will not have much choice but to accept the terms and conditions as there are no other alternatives. This is a tight situation and to avoid this you must have a good credit score.

People with bad credit may fall in to the trap of ’secured loans’. Secured loans are the ones where the loan applicant offers an asset as collateral security. The lender becomes secure about the repayment of the loan and not the borrower. Securing a loan with bad credit score becomes easy only when the applicant is willing to offer some asset as collateral security. This again is a very dangerous situation where an individual runs the risk of losing his entire collateral asset in case of failing to pay the loan installments in time. An individual should always avoid such type of a loan.

Resort properties normally require large amounts of finance which a person with bad credit may find it difficult to obtain. So it is always advisable to keep your credit score high. Incase the credit score becomes low due to unavoidable financial reasons it can be improved upon. There is no need to lose hope simply because a person has a low credit score. If the property that he intends to buy has good equity he should go out and try to obtain finances for it. There are many sub prime lenders willing to offer their services.

For a review of your credit report as it relates to a mortgage loan and a consultation on the best loans available to you, give us a confidential, no obligation and no cost call.