Careful … Holiday Shopping Can Hurt Your Credit

Do you find it hard to believe we’re less than 2 months from Christmas?  Today we’d like to share a holiday shopping tip that may help you avoid another sense of disbelief in the coming year.

It’s not uncommon to see stores offering charge card incentives along with deep discounts this time of year.  If you are contemplating a big expenditure in 2018, like a home or car purchase, avoid the temptation of opening a new account, just so you charge your purchase and defer payments for awhile. It doesn’t take much new credit activity to have a major (negative) impact on your credit score.

The OVM Financial/Team Move blog has 3 ways that new charge cards can cause problems.

  1. For starters, new credit inquiries can lead to a lower score.  The simple process of seeing if you qualify for a new card is a potential red flag for credit bureaus.
  2. The average age of your credit accounts can drop dramatically. Lenders like credit profiles with established activity.  If 1 or more of your accounts don’t have much history, lower scores are a likely result.
  3. Many “introductory” charge cards have low credit limits.  They can be easy to max out. In the process your balance due to credit limit ratios will be impacted.

The cumulative effect of these impacts on your credit can lead to a higher risk profile, lower credit scores and ultimately, higher rates to borrow money. Something as simple as opening 2 new small accounts and charging to near their limits, can be enough to drop a credit score by 50 points or more. In turn, this could lead to significantly higher interest rates and even place some loan approvals in jeopardy.

Tread cautiously before potentially damaging your credit this holiday season.  And if you’re thinking of purchasing a new home in 2018, please feel free to contact Sanford’s Team Move‘s mortgage professionals at 919-777-0114. They’ll be happy to take a closer look at your specific financial status, and provide guidance about the probable impact your holiday shopping could have on future big ticket purchases.