Don't let holiday credit card debt hurt your credit score

If you’re struggling to pay off holiday debt, you’re not alone. According to CardWeb.com, a firm that provides information on the credit-card industry, holiday shoppers charge an average of more than $1,000 on credit cards.

The University of Illinois also reports nearly a third of adults spend $100 to $500 more than they plan on holiday gifts. So it’s not surprising that come February or March, many are still having a hard time paying down their balances.

Skipping a payment or sending in late payments is not the answer. In the short term, you’ll be hit with penalty fees and high interest rate charges. In the long term, paying bills late will have a negative effect on your credit score. Always pay at least the minimum payment due, and pay more, if possible, to avoid additional interest charges.

Failure to repay debt responsibly will lower your credit score. This is the score that lenders look at when a credit bureau provides them with your credit report. A low score may cause lenders to regard you as a bad risk and possibly result in your being offered a higher interest rate or even denied credit altogether.

Check your credit report to see where you stand. To find out if your payment habits have negatively affected your credit rating, get a copy of your free credit report and score. You can also check your credit reports from all three of the national credit bureaus that lenders use to evaluate your credit status.

If you have a low credit score, take steps to improve it. Credit scores fluctuate based on your current financial situation. So before approaching any lender, try to pay off any outstanding bills and reduce your overall credit card debt. Consider consolidating high-interest debt with a low-interest home equity loan or line of credit.

Check to ensure your credit rating is updated. After you’ve taken some steps to improve your financial health, your credit score should improve. But it may take some time before you see the results reflected in your credit rating. This is because your credit score is not just based on your recent finances. It’s also based on your credit history. If, after some time has passed, you believe your score is inaccurate, however, there are steps you can take to improve it. Read more on how to correct your credit report.

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