The holidays are a fantastic time to indulge, but when it comes to managing credit, having a little self-restraint can really pay off. With 2013 lingering just around the corner, and more than a few consumers feeling what we’ve fondly dubbed Black Friday hangover, sitting down with a notebook and pen to jot down some credit resolutions might not be a bad idea.
With help from Credit.com expert Barry Paperno, we’ve listed five resolutions to get your score in tip-top shape by the next ball drop.
Stop opening store cards. Unless you have the self-control and the means to take advantage of retail cardholder discounts while paying the balances in full without interest, retail cards should be avoided at all costs, says Paperno. That’s because in return for that 10%-20% off for opening the line of credit, you’ll receive a score-dropping hard inquiry and new account on your credit report, a low credit limit and a high APR. Is another path to debt really worth it?
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Pay more than the minimum balance. Like running in place, paying the minimum payment due is sure to keep you at status quo. The debt’s interest will continue to pile up, requiring much more time to pay that balance down. Paperno recommends paying off as much as you can reasonably afford every month to salvage your score. Check how long that will take by using this calculator.
Check your credit reports and credit score. This should go without saying, but if you haven’t checked your credit report and score yet, now’s the time to do it. You can’t begin to make changes if you don’t know where you stand or have a goal for where you’d like your score to be, says Paperno. You can request a report for free from any of the three major bureaus using AnnualCreditReport.com — and make sure it’s accurate. You can get your credit score for free using Credit.com’s free Credit Report Card.
Set up automatic payments. Possibly the easiest way to get debt under control, automatic payments are a cardholder’s best friend. “This way you won’t accidentally forget to make a payment, which can cause an account to go past due,” Paperno says, since “past due payments are the worst thing you can do to your credit score.” Missing payments frequently is a recipe for disaster, even more than someone who misses their payments infrequently. The more severe and recent the missed payments, the greater the negative impact will be.
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Quit comparison shopping for credit. It sounds savvy on the surface: Any card worth its salt should stand up to the competition, right? But come holiday time, this can be a disaster in the making if you open too many cards. The problem with applying for several cards is that the hard inquiries and new accounts appearing on your credit report work against your score, as consumers who frequently apply for new credit have a higher risk of default than those who only apply for new credit when needed. If you’re unsure of an offer, and don’t have the cash, try using a card comparison tool.
Image: Ed Yourdon, via Flickr