Preparing for the Holidays

A few good tips from our friend Diane Rafai...

This time of year everyone is focused on the holidays: gifts, trips, parties...so much fun but so expensive. Be careful as you navigate through the next few months- you do not want to ruin the good credit scores you spent the year maintaining. Here are some tips to keep in mind about credit scores:

1. Inquiries: every time a creditor pulls your credit, it can hit your credit score 4-8 points PER INQUIRY according to the credit bureaus. So applying for new credit at department stores to get a discount on a purchase can cost you more than the discount it worth. Be careful about applying for new credit.

2. New credit: every time you do get approved for new credit, you get a new hit to your score for the following reason: length of time since new account established - and depending on what type of account it is, you could see too many revolving accounts, or too many department store accounts or too many open accounts any of these can have negative effects on your credit scores.

3. Credit limits: even if you keep your credit cards paid on time, if your balance at the time of the statement exceeds 30% of the available credit on the card, you may have points taken away from your score. (This shows up under your credit explanations as proportion of balances too high or ratios of revolving credit too high.) Many people believe as long as they pay the credit card off monthly, they are ok. But the fact is the balance used to evaluate your score on the credit report is the amount shown on the monthly billing statement. So if your plan is to pay the credit card off monthly, and you want to maximize your credit score, then you need to pay the balance BEFORE the bill comes out so the statement reflects an amount less than 30% of the available balance.

Use your credit wisely this season so you start 2012 in as good or better shape than you end 2011. Credit scores are so important to all aspects of your financial health that proper management insures a solid foundation.