Nov 1, 2008

Holiday Financing and Your Credit

It’s almost that time of year again, and with the economy in an uncertain state, many holiday shoppers may be looking to cut back on large expenditures for the holiday season. Holiday financing can help save money and your credit, if you’re smart about how much you spend and set realistic limits from the start.

Buy Now, Pay Later – At What Cost?

Traditional holiday credit in the form of 90 days of no payments and no interest is common in many stores, and it can help you to improve your credit standings as well, if you’re smart about how you spend. The key is to only purchase what you know you will be able to pay off within the timeframe of the special offer. This will allow you to save money in two key ways – by avoiding the interest payments if you’d charged your purchases to a credit card, and by keeping the balances on your credit cards low during the holiday season.

Where many people fail to shop wisely is by taking advantage of the deferred payment options in addition to spending on their credit cards. This is often a costly mistake – people end up over-extended, and then they are hit with compound interest charges that accrue from the moment of the initial purchase. That’s three months of interest charges added into the initial purchases, and many times, the interest rate is several times higher than that of a typical credit card. So how can you take advantage of holiday financing without breaking the bank? It’s simple if you plan ahead:

  • Make a budget: Plan out your purchases now, before the holiday rush, and get a cost estimate of how much you’re likely to spend before you start your shopping, whether online or in retail stores.

  • Make a plan: Big ticket items can often take advantage of special financing directly from the store so shop around and find the one that makes the most sense for your budget.

  • Stick to the plan: When it’s time to shop, keep your price range in mind – don’t give in to the temptation to use your credit cards to finance your holiday if you’re using deferred payment options as well. You want to be able to pay off all of your holiday shopping before those high interest rates set in.

  • Read the fine print: Make sure that any deferred payment plans you agree to spell out the exact date that payment is due in order to take advantage of the special financing. Be aware that if you miss the initial payment date, the interest rate may default to a much higher percentage – so shop wisely.

One word of caution when it comes to deferred financing – while it can help your credit score to maintain reasonable balances on your credit cards throughout the holiday season, if you default on the deferred payment arrangement, it will undo all of your careful planning and hard work. These finance companies will report any late payments the same as your credit card company, so be certain to budget wisely and don’t overspend. If handled properly, buy now, pay later can pay off not only in interest savings, but in saving you the holiday credit crunch as well.

Posted in budgeting, credit, deferred financing, finance, financing, interest rates | No Comments »



Jan 5, 2008

Credit Repair After Bankruptcy

Many consumers believe that after filing bankruptcy their financial lives are ruined. One of the biggest myths about bankruptcy is that you can’t get credit for 10 years. The truth is the bankruptcy will generally stay on your credit report for 10 years (unless you are able to get it removed) but you will still be able to start rebuilding your credit immediately.

You can dispute a bankruptcy on your credit report the same way you can any other listing. If you are fortunate enough to get the bankruptcy removed, you will be able to start repairing your credit much easier. However, if you don’t change your spending habits and make some lifestyle changes, removing your bankruptcy will only delay your financial misery and you will be back where you started.

Learning from your mistakes and living below your means is the only way you will ever attain financial peace. Learn how to make a budget and stick with it. You should probably only get a couple credit cards strictly to rebuild credit. Discipline yourself to use them for nothing but credit rebuilding.

When you are ready to start rebuilding your credit (which should be immediately) you will need to start small. Don’t expect lenders to give your high credit limits right away. You may have to start off with unsecured credit cards with high interest rates. That’s why I suggest keeping a balance of only $50-$100 and ONLY using these credit cards to rebuild your credit.

While you are adding positive trade lines, it is important to also try to remove bad credit from your credit report. If you use both methods correctly, you should have respectable credit scores within 6 months to a year. At that time, you will be able to get better interest rates and should consider transferring any balances from the high interest cards to the new lower interest cards. Just remember, the best thing you can do for your financial future is learn how and why you got yourself into this situation and how you’re going to avoid it from happening again.

Posted in after bankruptcy, bankrutpcy, budgeting, credit, credit report repair, dispute bankruptcy, improve credit scores, rebuild credit, remove bad credit, unsecured credit cards | No Comments »