There is one very important thing you need to consider—Your credit score can be easily influenced which implies that a missed credit card or loan payment can drop your credit score by several points. And with the holiday season, the propensity to spend increases significantly. So it is extremely important to create a budget and stick to it by spending wisely. Plus, here is what you can do to keep financially fit this holiday season:
Check your credit report and credit score
A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts Federal law allows you to get a FREE copy of your credit report from every credit reporting agency such as Transunion, Experian and Equifax. Plus, you can also use resources such as Credit Karma and Credit Sesame to help you better evaluate your credit situation on a continual basis.
A credit score is a three-digit number generated by a mathematical algorithm using information in your credit report. It’s designed to predict risk, specifically, the likelihood that you will become seriously delinquent on your credit obligations in the 24 months after scoring. Plus, a closed credit card, too many credit line inquires or inaccurate credit reporting can also lower your credit score. So make sure you are consistently monitoring your credit score even if you aren't applying for a loan.
Decide which debts to pay off first.
Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts. Of all your credit cards, the one with the highest interest rate should receive priority on repayment because it's costing the most money to carry that debt, month over month. Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first.
Focus on clearing charge-offs and collections
If you feel you do not have enough funds to pay on all of your debts, you should focus on making the minimum payments to your current accounts and keep them in good standing. You don’t want to sacrifice your good accounts for those that have already negatively affected your credit score.
Trinity Debt Management offers this information to help you better understanding understand credit reporting and collections. View the document here
Choose a personal loan instead of a credit card to pay non-education related expenses
Most credit cards have a adjusting rate; this implies that it changes with the Prime Rate. If Prime rises, your credit card rate will rise (Prime has already increased four times this year). Plus, if your credit score drops, that could also lead to an increase in your credit card rate. But most personal loans have a fixed interest rate for the length of the loan term. Therefore your rate will not be adjusted by any changes to Prime. Plus, personal loans typically have an interest rate lower than most credit cards.
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