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Starting 2017 Right

Christmas is over…the decorations have been taken down and presents have been opened. New accounts have also been opened, credit cards have been maxed out, savings accounts have been drained and probably so has your credit score. And now, here come the bills. Now is the time to look ahead and start doing some damage control.

Credit card balances are a large part of your credit score. Even without any late payments if you have two or three maxed out credit cards you could be looking at scores that are only in the low 600’s. Optimally you want to get those balances down to under 20% of the high credit as quickly as possible.

The first thing to do is stop spending! Put the credit cards away for a while. Then you need to come up with a plan to pay them down. Make a list of all your credit cards and their interest rates. Start with the credit card with the highest interest rate and work on whittling it down first. Always make more than the minimum payment and preferably make a couple of payments a month, don’t just wait until you get your statement. Continue to make at least the minimum payments on your other credit cards, more if you can, but focus on the higher interest rate card first. Once it’s paid down, move on to the next one.

Don’t close any of your cards, even the ones that were recently opened. Once opened, the damage is done. You have a new card, with no history, a new revolving inquiry and possibly a high balance. Work on paying the cards off but don’t close them. If they have a long history and you close them you are going to lose that history.

See if any of the cards will raise your credit limit. If it’s a card you have had for a long time, there’s a good chance they will and that will help your revolving ratios. You can also ask for an interest rate reduction. This is a good thing to do once a year with all of your credit cards anyway.

Transfer balances. If you have low interest rate credit cards with no or small balances, you can transfer some of your larger balances from the high interest rate cards to the cards with lower balances. This will help pay them off quicker.

Start an emergency fund if you can. Rebuild your savings account for emergencies so you don’t have to use a credit card if something unexpected should arise. If you have no emergencies during the year, then you have created a reserve that you can use for the holidays next year without over using your credit cards again.

Always be sure to make the payments on time. One 30 day late even on a small credit card can easily drop your credit score over 100 points. If you can make more than one payment a month to your credit cards, even better!

The holidays can be hard on our finances and equally hard on our credit scores. But with a little planning and a little saving you can hopefully eradicate any damage quickly and hopefully avoid the same problems next year.

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