What Black Friday Means for your Credit

Black_Friday_Target

In just a few weeks we’ll all be bombarded with pre-Black Friday ads and promotions as we flip through the channels or tune into your favorite radio station. But before you put together your list and get ready to face the shopping anarchy on November 27th, there are some shopping precautions you may want to take.

In this week’s credit blog, we’re going to look at the facts, the deals, and the safest shopping methods for your 2015 Black Friday.

The Facts

First, let’s get some of the Black Friday facts straight. In 2013 $12.9 Billion dollars was spent on retail sales on Black Friday. $1.964 Billion was spent on online retail. In 2012, $59 billion dollars was spent on Black Friday weekend (Thurs-Sun). That averages out to about $423 per individual shopper. The average holiday shopper will spend around $804 for the entire holiday season. According to these statistics, more than half of holiday shopping is done on Black Friday.

The “Deals”

Are those “Outrageous Doorbusters” really THAT outrageous? On Black Friday you will see doorbuster sales in every store you go. You may even camp out in line to secure your item. Just remember retailers aren’t here to give you a deal. Retailers are here to make money and turn a profit. Once you’re in the store and you get that doorbuster, prepare to be pounded with a plethora of add on items that seem to fit so well with you “deal”. Once you walk out of the store chances are you’ve spent more than you’ve planned and bought things you didn’t need.

Opening Store Cards

You’ve stood in line for an hour waiting to get into the store. You’ve shopped for an hour, and now you’ve been standing in line for another hour waiting to check out. Suddenly a new lane opens up and the cashier says “Anyone opening up a new store card can come to this line.” Sounds tempting doesn’t it? They may even offer you another 20% off on your purchase on top of the line cut.

While you time and possibly money will be saved, your credit score will take a hit. Taking on new debt and a new inquiry will cause your credit score to drop. On top of that, most consumers will pay off the debt in increments. This will cause you to pay interest on the purchase. Now that great deal you just got doesn’t happen to be a deal at all and you may wind up paying even more than you thought.

No Payments Until 1 Year

Retailers will try to get you to buy large purchases with the promise of delayed payments. “Buy now and you won’t pay until next year!” What they won’t tell you is once your payments begin, you’ll still have to pay interest for that entire year you weren’t paying. Suddenly, this doesn’t sound too great. If you do fall victim to this scheme, make sure you pay off the entire purchase BEFORE your payments start. This way you can avoid all those pesky interest fees.

Shop Safely

Last year Target fell victim to a massive security data breach. Millions of Black Friday shoppers had credit card info and valuable personal information stolen. Data breaches seem to be showing up more and more in today’s tech filled world. If you fall victim to one, your credit could suffer for the rest of your life.

The simplest solution to this: Pay in cash! If you are going out shopping this Black Friday, it might be a good idea to swing by the bank and take your shopping budget with you. This way you can protect yourself against cyber criminals and stay within your budget as well.

 

For more do’s and dont’s of credit, consult our credit blog here!

For more information on data breaches, check out Data Breaches: Why you Should Worry

5 Ways to Build Your Credit Score

When it comes to improving your credit score, consumers are left in the dust. Most individuals have basic knowledge of what can destroy their credit. Few know the steps to increase their credit score. Here’s 5 tips that will help build your credit score to where you would like it to be.

1. Positive Trade Lines of Credit

Without positive trade lines of credit, you cannot have a good credit score. Your credit score is determined upon the following factors: payment history, amounts owed, length of credit history, new credit, and types of credit used. The more positive trade lines of credit you have, the better. Does that mean you should go out and apply for loads of credit? Not exactly.

FICO chart to build your credit

The more credit you apply for, the more inquiries you will acquire on your credit report. The more inquiries on your credit report, the lower your score. Also, anytime you take on new debt, your scores will initially see a drop. It is not until a few months of on time payments that you will start to see them increase again.

Individuals with no or few trade lines of positive credit may not be able to get approved for new credit. If this is the case, you may want to seek out secured credit cards. Secured credit cards are credit cards that the consumer backs themselves. These cards report to all three credit bureaus and will generate positive credit after a few months of use. Secured credit cards are a great tool to help build your credit.

If you already have trade lines of credit, it is critical to make sure they are paid on time. This includes: student loans, credit cards, car payments, and mortgages, among others. (We’ll get more into this further in the article)

2. Become an Authorized User

Everyone knows that one person who has immaculate credit. Maybe it’s a close family member or one of your best friends. They never miss a payment and are never denied. If it is alright with your friend or relative, it would be beneficial for you to become an authorized user on one of their accounts.

Becoming an authorized user will build your credit as it will show a positive trade line on your credit report. You can essentially “piggy back” your way to better credit with the help of a friend or relative’s account.

Becoming an authorized user on the account will not require you to get your own card or make any payments. Your name will just be attached to the account. Just make sure your have the OK from your friend/relative. However, if they miss a payment and the account becomes derogatory, it will negatively affect your credit as well.

3. Pay Down Accounts

Keeping your credit utilization down will allow your scores to go up. It is recommended to keep your credit utilization rates as low as possible (but not at zero). The closer you come to the high balance on your account, the more your scores will decline. If an individual with maxed out credit cards has no derogatory accounts, his score will negatively reflect that.

Build your credit utilization

A recent study shows the highest credit scores belong to individuals with 1-10% credit utilization. It is also worth noticing that consumers with 0% credit have an average score lower than consumers with 31-40%. The idea is to use your credit cards, but pay them off and use them minimally. Also take into consideration that the more debt on your account, the more interest you will wind up paying over time.

4. Avoid Derogatory Accounts

Derogatory accounts are negatively reporting items on your credit report. These accounts devastate your credit score. Most derogatory accounts will start off as just one late payment. If not handled correctly, late payments can change to charge offs or collections.

It is essential to your credit to always pay on time! Set reminders or use autopay features to ensure that you are always current. Just one derogatory account will drop your credit score dramatically, making it difficult to build your credit score.

5. Seek Credit Repair

If your credit report is flooded with derogatory accounts or incorrect information, you need to contact Better Qualified. Even if satisfied or current, derogatory accounts can remain on your credit report for 7 to 10 years. Better Qualified will attack derogatory accounts and correct false information. It’s what we do! Give us a call at (888) 533-8138, or fill out the form to the right for a free credit analysis. Even after our dispting process, Better Qualified will continue to advise you towards building your credit score.

 

Educate yourself a little more and read our credit blog. Be sure to check out the don’ts of credit with the 7 Mistakes That Will Destroy Your Credit