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Consumers Ruin Credit Report during Holiday Season

By Faye Mergel
Published: Thursday, November 5th, 2009

People love to shop, especially during the holiday season. Unfortunately, it has caused many consumers to carry debt all year round just for a single holiday shopping spree. Some of them are not able to meet their monthly payment obligations, which is a very negative mark on their credit report.

Consumers Ruin Credit Report during Holiday SeasonA survey conducted by an independent consumer organization reveals that 6 percent of adults still carry debts from their previous year’s holiday spending. That means about 13.5 million consumer credit reports are marked with year-old debts.

For consumers who used their cards heavily last year, especially during the holidays for gifts, and were still unable to pay those debts off, it is very likely that they will be paying hefty charges on their plastic. That is because many banks are levering up rates or imposing additional charges through annual fees. Experts say banks are trying to earn as much while they still can. Beginning February next year, the federal credit card reform will begin to take full effect, which will crimp several revenue sources for banks and other creditors.

Wells Fargo notified cardholder early last month that they will raise interest rates by 3 percent by the end of this month. Citibank also spiked up rates for many of its cardholders to 29.99 percent this late October.

On a brighter note, many consumers have shown better effort in reducing debts in their credit report. More than a third of consumers polled in another recent survey report that they have paid off credit card debts or have closed an account this year. Additionally, the last Consumer Credit Report by the Federal Reserve showed that revolving credit decreased at an annual rate of 13 percent in August. That means the $897.6 billion worth of credit card debt at the end of 2008 has gone down to $897.6 billion this year.

Finance experts advise consumers to further trim down on their credit card spending this year to avoid carrying post holiday debts next year. Before making any loan application, consumers are advised to check their credit report through 877-322-8228 or by going to annualcreditreport.com. Doing a credit check helps consumers identify errors in their accounts to avoid paying for debts they do not owe. Cardholders who habitually carry long-term debts are advised to check their report for debts which are more than seven years old. Experts say those items should be disputed or removed since delinquencies and late payments cannot stay longer than seven years under a person’s name.

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