Home > 2014 > Credit Score

Can Your Old Sofa Hurt Your Credit?

Advertiser Disclosure Comments 0 Comments

It is such a well-known phenomenon that credit counselors have a name for it: “Old Sofa Syndrome.” And if you’re not careful, it can wreak havoc on your budget — and your credit scores.

New homeowners are particularly vulnerable, but so are those who have lived in the same place or with the same furniture for years and decide to replace “just one thing.”

Counselors with Consumer Credit Counseling Service of San Francisco warn clients to beware of Old Sofa Syndrome (OSS) in their new homebuyer classes. Rick Harper, senior vice president CCCSSF, explains:

(We) remind them that often new homeowners run up their credit card balances soon after they close on their new home. This is especially true for first-time homebuyers.

All of a sudden the old sofa doesn’t quite look right in the new living room. So out goes the old sofa and in comes the new sofa, which is financed by the credit card. Then the old drapes don’t look right behind the new sofa and the process is repeated over and over.

Suddenly within a few weeks or months there is a huge credit card balance competing with the new mortgage payment and this is dangerous.

Large balances on credit cards can affect a consumer’s credit score dramatically. In most scoring models, the debt consumers carry account for about a third of their credit scores, and one of the important factors evaluated is how close the balances on their revolving accounts (like credit cards) are to their credit limits. It’s known as “utilization.” Generally, the lower their debt in relation to their available credit, the better for their credit scores. Most consumers will be fine if they keep balances below 20% – 25% of their available credit, though 10% or lower is ideal. (You can find out how your debt is affecting your credit scores with a free tool like Credit.com’s Credit Report Card.)

The Cure for Old Sofa Syndrome

The cure for OSS? Take a deep breath, and wait. Figure out whether the purchase fits into your budget, and really think about what will happen once you replace that one item.

Harper says he and his counselors ask household members to “agree not to make any major purchases for at least six months so they can adjust to their new mortgage payment. This will help insure their long-term homeownership sustainability.”

What about times when you have to make a purchase you haven’t saved for; the washing machine or refrigerator goes, for example?

“If you do end up spending more than you anticipated, be sure you put a plan in place to pay down the balance,” Tom O’Donnell, senior vice president of Chase says. He points out that Chase Blueprint offers a feature that helps cardholders save on credit card interest and pay down balances faster. Or you can use a credit card calculator to figure out how much you’ll have to pay each month to pay off your balance in a specific time frame.

I experienced this syndrome firsthand recently. I had to buy some dining room chairs to replace ones our foster kittens destroyed. Soon I found myself looking for an entire new dining room set. Fortunately I didn’t find exactly what I was looking for, and eventually decided to stick with what I have.

But the replacement chairs I settled on will clash with the curtains, so those will have to go.

Hopefully I can stop there.

More on Credit Reports and Credit Scores:

Image: Fuse

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team