Is Your Credit Taking a Hit? For many, the month of December marks the beginning of the holiday shopping season. With markdowns, discounts and store sales, many local and national retailers are looking to cash in on the Christmas spirit. At the hardware store, the bookstore, the mall and even the grocery it happens so nonchalantly. The cashier smiles and asks, "Would you like to save 20 percent today, just by opening a charge card?" Of course, who wouldn't want to save 20 percent?! Be aware that every time you apply for a card—even for a department store card—your credit score takes a hit. In turn, that 20 percent savings could translate into a drop in your credit score. There are lots of sneaky ways your credit score may be adversely affected. Did you know closing out zero-balance cards may actually hurt and not help your credit score? Since part of your credit score is determined by your ratio of available credit to the amount of credit you actually use, the better option may be to keep that unused card open. For example, if you have $8,000 in available credit across three cards. You owe $2,500 total between two of those cards, and nothing on the other. This means you have $5,500 in credit you are not from using. You're looking pretty good to the credit score folks. But, if you close your zero-balance card, you now have $5,000 available credit, with $2,500 owed on the remaining two cards. So you now only have $2,500 you're not using. Not looking as good anymore. The reason is, you will look better if you keep your credit utilization ratio at 30 percent or below. In this example, you're doing that simply by keeping that extra, unused card active. Another surprising tip? Try to hold on to your oldest cards the longest. A big part of your credit score is length of credit history. So the older the card (with consistent, prompt payments), the better. Also, be sure to always pay by the due date. Your ability to pay on time—every time—counts as much as 35 percent of your score. One late payment can cost you up to a hundred points, which could affect your rates if the time comes to apply for a loan. Lastly, try not to consolidate cards. Though it seems to make sense to have one payment every month, your score actually fares better if you have small balances spread across several cards versus one big balance on one card. Easier yes, but according to the credit gurus, definitely not better. Please be sure to contact the Local Government Federal Credit Union or visit www.lgfcunewsworks.org/ for more information on ways to improve your credit score.
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