Now that we’re in the middle of the holiday season, many people are probably panicking over how they’re going to find a way to pay for the debt they’ll get into paying for gifts, travel expenses, and high electrical bills because of their extravagant holiday light decorations. Many will choose to ignore these concerns and put it all on their credit cards. This, of course, becomes a problem in January when the bill comes in and all of your purchases are there – with interest. It can be a little disconcerting and dangerous for your credit score and peace of mind.
Your credit score is sometimes all lenders, landlords and even hiring managers have to judge your character and level of responsibility. If you are constantly paying your bills late or you have a high debt to credit ratio, this will negatively affect your credit score. Your credit score will determine your ability to get a car, qualify for a mortgage or get a call back for that job, so it’s very important to keep that score as high as possible. If you are currently experiencing or about to experience a credit hangover, it can be overwhelming, but there are things to do that can help. Here are some things to keep in mind:
- Get a credit report: One of the most famous phrases that came out of Orwell’s 1984 was that ignorance is bliss. Don’t use this as a mantra as you’re trying to fix your credit. You need to know the numbers, the inquiries and all of the accounts, so you can determine the best course of action to right the ship. You’re entitled to receive a free credit report each year under law, so take advantage of it.
- Pay down your debt anyway possible: In order to get rid of the credit hangover completely, you’ll need a way to pay off that debt. If you can, try to work out a deal with your creditors to see if there is a way to work out a deal or payment plan. If this is impossible, try to think outside of the box. For example, do you own structured settlement payments because of a lawsuit settlement? Why not sell some of them? You can actually get cash for your structured settlement payments, which can help you in a time of crisis. However you can pay down your debt, do it.
- Start practicing good habits: The holiday season is a time when many people feel pressured to spend money to make their friends and family happy. Now is as good a time as any to start amending your spending practices. For example, did you know that it’s possible to not spend all of your money on gifts this holiday season? There are ways to show your love for your friends and family without expensive gifts. Get creative with your gifts. Author Rich Roll and his wife recently completed a podcast where they talked about writing a small screenplay and performing a play with their kids for their friends and family. Or you can knit a quilt or even complete an annoying household chore for them. Your efforts will surely be appreciated.
As you prepare for this holiday season, remember that there are more important things than money. Now is the time you can get over your credit hangover, so you can make 2014 the best year yet.
Todd is a finance professional and likes to share his experience through writing.