As the shoppers rush home with their presents and their credit card balances continue to increase... their credit score could pay the price.
Something to keep in mind this "season o' shopping" .... your credit score is determined on many factors and one of these factors is how high you keep the balances on your credit cards. In order to keep your credit scores in tip top shape, make sure to keep the balances on your credit cards below 30%.
This means if your credit limit is $1000 then you will want to keep your balance under $300. Keep in mind if you spend over $300 and are above the 30% point, you will want to make a payment to your credit card company to take your balance below the 30% point before they report to the credit bureaus in order to keep from possibly decreasing your credit score. You can call your credit card companies and ask when they report to the credit bureaus each month so you can be aware of when you need to make your payments. This date may or may not correspond with date your payment is actually due.
Another way to make sure you stay under the 30% threshold is to inquire with your credit card company about a higher credit card limit. Make sure you are being responsible and honest with yourself when making these type of decisions!! Do not get yourself into a bad situation. The best policy is to “know thyself” and your spending habits. If you spend whatever you have available….. maybe increasing your limit isn’t a great idea for you. Begin this year to really discipline yourself to stay below that 30% threshold each month and watch your credit score start climbing.
Also note.... your score will take a big hit (dropping considerably) if you exceed your high credit limit for your credit card and it is reported to the credit bureaus.... not only do you usually have to pay an over limit fee and you may lose a low interest rate.... you may see a considerable drop in your credit score..... no bueno! Best practices is to know exactly where your balances on your credit cards are and keep them under the 30% tolerance.
Knowing the factors that determine your credit score is the first step in raising and keeping your credit score in tip top shape. Self discipline is the action that makes that happen!
Merry! Merry! and Happy! Happy!! Cheers to a wonderful holiday season and may your new knowledge of credit scoring keep YOUR credit score happy all year long.
…..PS….. beware of the temptation to open tons of new credit cards because of the 20% you could save on your purchase….. it may cost you in the long run if it drops your credit score…..another factor in determining your credit score is “opening new accounts”…. Tune in next week for more info on this useful tip!
