Tie Up Your Credit’s Loose Ends

Posted on: December 23rd, 2010 by

Credit Score - DebtIt has been all over the news this year:  Americans have really struggled to keep their credit under control.  Earlier this year, FICO, the company responsible for the credit scoring system, said 25.5% of Americans had sub-par scores of 600 or below, and the latest data from the Federal Reserve indicate consumer credit card debt increased by $6.5 billion in the third quarter of 2010.  Despite this, there are a few steps you can take to start 2011 off on the right foot, credit-wise.

Run your credit report- Consumers are eligible to receive one free credit report annually, as part of the Fair Credit Reporting Act, so if you haven’t taken the government up on this offer, then now’s the time to do it.  You can get a free credit report from any of the three major reporting agencies at AnnualCreditReport.com.

Pay off holiday debts before New Year’s Eve- Any debt you carry into 2011 is going to be quite costly, as interest rates currently remain pretty high, at around 14.7%.  Consider paying off your December credit card bill as soon as possible, even if it is before the bill arrives in the mail.

Don’t close the store cards you opened up during the holiday season- Saving 10% to 15% off when buying presents in bulk may entice many consumers to open store credit cards, despite their apparent drawbacks and the fact that a large number of credit inquiries can actually drop your credit score.  However, closing these accounts once you’ve paid off your balance won’t repair any damage done over the holidays.  If anything, it will lower your score even more since terminating an account right after it was opened tells FICO that you couldn’t afford the credit line to begin with.  Keep the card and use it responsibly, only charging up to about 10% of the credit limit.

Review the fine print on your credit card contract- The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 provides consumers with many protections they didn’t have before, but it’s far from being an iron-clad piece of legislation.  For example, the CARD Act doesn’t prohibit credit card issuers from raising interest rates; it just makes it a little more difficult for them to do so.  It also doesn’t require any notice if your credit card issuer has lowered your credit limit or closed your card.

Protect your identity- People should be on high alert for during the holiday season, but, it’s actually right after New Year’s that cyber-criminal come out of the woodwork.  You will be receiving your 1099s, bank statements, and important tax documents in the mail come January, all of which have your name, address, and Social Security number on them.  Make sure you keep a watchful eye out.



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