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Post-Holiday Season Puts Pressure on Credit Score

By Sally Maison
Published: Friday, January 15th, 2010

Retail sales went up higher than expected for the last quarter of 2009. While this may sound like good to retailers, it is not such good news for consumers since it simply means they have spent more last holiday season than in the previous years. This places many consumers in greater likelihood of default or delinquency, which could affect their financial fitness when it starts hitting their credit scores.

Post-Holiday Season Puts Pressure on Credit ScoreExperian, one of the three major credit reporting agencies, says more cardholders were behind their payments going into the 2009 holiday season than the preceding year. Experian President, Angela Granger, notes that credit card delinquencies tend to go up during the first quarter of a year, which is quite a normal trend. However, Americans entered the holiday season with higher delinquency levels, giving analysts a strong reason to believe that there will be an increased number of delinquencies for the first quarter of 2010.

Consumers do not want to fall into delinquency because it makes them lose money by paying for higher interest and other fees associated with late payments. Additionally, it could hurt their credit score by huge points and will affect their creditworthiness over the next few years. Finance advisers say consumers do not have to dodge effects of the holiday spree on their credit score since there are so many ways to pay off card debts before running into delinquency.

Finance expert and author Judy Lawrence says the first thing towards recovering this New Year is reviewing bills acquired over the previous holiday season. Consumers are advised to review those bills carefully for erroneous or mysterious charges since identity theft tends to increase during the holiday season. Since many Americans carry more than credit card, experts advise them to pay those with highest interest rates first to avoid bigger penalties.

Bonuses may not be as generous this year as they were prior to recession, but finance advisers say consumers can save big if they use their bonuses to wipe out their credit card debts. By paying balances quickly, consumers can avoid paying huge interest rates that at times reach 29 percent, experts add.

After indulging themselves in parties, travels, and shopping sprees, specialists say the first quarter of a year is a time for consumers to tighten their spending. Consumers are advised to find as many ways possible to save starting January and see how far they have gone towards paying debts and saving money when March ends.

Finally, finance advisers tell consumers to be more conscious of their credit status: their debts, income, and credit ratings. Being more aware helps consumers manage their finances better, experts say.

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