With the holiday season comes lots of spending. Gift giving, decorating, entertaining, vacationing and going out to eat – it can all rack up the big bucks, and pretty quickly, too.
Sadly, overspending doesn’t just deplete your bank account or give you bigger credit card bills to pay. It can also hurt your credit and, subsequently, your ability to get a mortgage. Are you hoping to buy a home in the New Year? Then don’t let your holiday habits get the best of you. Here are five things you’ll want to avoid this season:
Opening new credit cards.
Having too many credit cards – especially ones with big balances on them – can really hurt your credit. It also sends up a red flag to a mortgage lender that you’re not very responsible with your money, which could hurt your chances of getting approved down the line. Keep your number of credit cards to a minimum; ultimately, you want a good mix of revolving (credit cards, etc.) and non-revolving credit (auto loans and the like).
Maxing your current cards out.
Lenders are going to look at your debt to income ratio, and the larger your credit card balance is, the more off balance that ratio is going to be. Try to only spend what you have – in cash, in your bank account, etc., or consider layaway options to spread your costs out over the entire season.
Failing (or forgetting) to make payments.
Just because you’re spending money on gifts and stocking stuffers doesn’t mean you can forgo a bill or two this month to cover it. Making late payments – or not making payments at all – is a direct trip to bad credit (not to mention those friendly collection agents who love to call at all hours!)
Using cards to pay off other cards.
This is a bad idea in more ways than one, and it starts a vicious cycle of ever-rising credit card debt that can’t be tackled or tamed. Pay off your credit card bills using cash, check or debit – and make sure to do it on time, too. You don’t want to add late fees or additional interest to the equation.
Get a Handle on Holiday Spending
Be careful with your holiday spending this season – especially if home buying is on your mind. Take steps to improve your credit score over the coming months, and check back here later this week for more tips on managing holiday expenses.
Article provided by PWAR Affiliate Member:
David Aikman, Embrace Home Loans