- Tax Hacks 2015: Don’t Overlook These 8 Deductions and Credits
- Where to Sell Your Stuff for Top Dollar
- ‘Nips and Tucks’ to Get Your Tablet Computer Running Like New
- Best and Worst Things to Buy in March
- Americans Love Nordstrom, Costco and Amazon, And Then There’s Wal-Mart …
- 6 Ways to Make Cheap Foods Taste Delicious
The holidays may be long gone, but many gift-givers are still paying the price for those presents.
The average person with active credit still owed more than $4,200 at the end of 2010, according to new data from Experian, one of the three largest credit-reporting bureaus.
On the plus side, they also found that consumers hold an average of 1.97 credit cards, which is down almost 23 percent since 2007. The trade-off, however, means that consumers now carry a larger balance on those cards – more than 30 percent of their available balance, which is up 10 percent since 2007.
“Overspending at the holidays or at any other time of year can often have broader implications to their overall fiscal fitness, said Maxine Sweet, a vice president at Experian. “By carrying over credit card balances and utilizing a significant portion of their available balance, they can potentially negatively affect their credit scores, which can in turn, hurt them when it comes to applying for other types of credit down the line including mortgages and car loans. It’s important for consumers to get that debt under control before it has a lasting impact on their credit scores.”
To prevent your holiday debt from costing you your credit score, Sweet suggests:
- Assess your overall financial situation. Before you do anything else, it’s important to examine your entire financial situation, including your monthly budget and your short and long-term financial goals. Make a list of all of your debts, payment due dates, minimum payment amounts, interest rates and the timeframe in which you would like to pay down your debt. Don’t forget to consider the other financial goals you may wish to accomplish.
- Select a payment strategy that works for you. Consider paying down the credit cards with the highest interest rates first. If that seems too daunting, try paying down your smallest balance first so you can see your progress toward eliminating your bills right away. Pay more than the minimum payments, if you can, but most importantly – always pay on time. If you need additional help managing your debt, you might consider reaching out to an accredited credit counselor such as a member of The National Foundation for Credit Counseling (http://www.nfcc.org/).
- Use tax returns and holiday bonuses wisely. Holiday bonuses and tax returns are two larger lump sums of money that can be used to make a dent in debt, if used wisely. Make sure you are taking full advantage of extra income by putting it toward credit card debt or using it to save for next year’s holiday expenses. Don’t look at these things as free money to spend – rather, use them to pay down debt and boost your credit score to help meet your goals. [Stacy recently wrote all about this in 10 Dumb Things to Do With Your Tax Refund.]
- Know what you want to buy and the best time to buy it. Write down all of the people you need to buy for and start listing ideas for potential gifts. Have an idea of what you want to buy well in advance of the holidays and keep an eye out for those gifts over the course of the year. Carefully review your favorite stores’ weekly ads or use a service such as pricegrabber.com, which allows you to compare prices on thousands of items including electronics, furniture, books, movies, and even groceries to help you get the best prices. Take the time to research the best times to buy big ticket items. For instance, bicycles and sports gear often go on sale in January and February while big home appliances can usually be found at discounted rates during September and October. Knowing what you want to buy will give you plenty of time to take advantage of sales and avoid marked up prices as the holidays near.
- Check your credit score so you have a benchmark for improvement. Check your credit report and purchase a credit score so you understand the baseline of where you stand and how your credit may have been impacted by your holiday spending. During times of high activity on your credit accounts, it is also especially important to make sure that your credit report is accurate. Then, after you have had time to achieve your goals and pay down your debt, get another score to see how where you fall in the range of risk has changed once you have paid down your debt.
To find out how your hometown ranked on Experian’s list of the 25 most debt-ridden cities in the country, check out their list:
|City||2010 Bank Card Balances||City||2010 Bank Card Balances|