During holiday season, it is expected to have competing shops and malls announcing their end of the year and inventory sale schedules. If you have ever been to one, items are marked down up to 70% off the original price tag. There are few, if there are any, reasons to resist the temptation and let our guards down at least for the holidays. It comes once a year only anyway. And you need new items to brag about in front of your relatives and friends.
But because the mood is uplifting and everyone is happy during the holidays, people will most likely forget that after the fun dies down, the credit line bills will suddenly arrive and will give you big headaches afterwards. It makes me think about how aggressive marketing during the holidays affect the logical side of the brain. It even comes to the point that the brain does not seem to function well when we see Christmas trees and hear Christmas carols at the mall.
The relationship between using credit cards to its maximum limit and the effect of this on the credit score is simple. Lenders do not want risks and that is why as much as possible they will remove potentially risky people from their list. If a person spends too much and maxed out his credit card a couple of times already, it means either one of these two things. First, he may have a problem with spending which is a big no-no to lenders. Second, this might be a sign of financial difficulty because he is already sustaining his life through the use of a credit line. That means, his assets are lower compared to his liabilities.
Of course, people with credit lines do not want their card companies to think they have issues with overspending or they have financial difficulties. Because if that is the real case then they are running a possibility of eventually getting high interest rates for their credit lines and loans. This will be a very bad situation for the person since higher interests will just prevent you from paying the real debt. Your monthly payment for your credit bills will just go to paying the interest.
So, does that make a good eye-opener for the upcoming holiday shopping spree? It would be best to consult your score first and then prepare some cash just in case you need to buy something. You can still use your credit card. However, do not exceed 25% of your credit limit.