I wanted to write a post about the holidays. Why? Because they are upon us, and it is more fun to think about gingerbread men, the twinkling eyes of children opening presents and food than it is cold weather, slush and being held captive by relatives we haven't seen since last year.
So, with that in mind, let's chat about some pitfalls we may avoid. First and foremost, getting a bunch of credit cards to save that 15% at the Gap, or Cabela's, or Macy's. Nothing against those folks, I rather like them, however, consider this the next time you are hit with the offer to 'save 10% on all store purchases when you open up a credit account!'
The question then becomes, why am I doing this? Certainly saving 10% is better than nothing, but is it worth the potential 'ding' to our credit? With inquiries, unfortunately come drops in credit scores. I've seen scores plummet with too many inquiries in a short period of time. So, please, be mindful, I would submit unless it's a very good deal, I would hold off on getting that store card to save 10-15%.
What would happen even if we get the card? Well, it would be another tradeline that is reporting on your credit. There is a point, usually 3-4 tradelines of revolving credit, where we begin to have too many cards. Too many cards can present risk to future potential borrowers as well. It's a fine line gang.
So, what do I suggest? Simple, in a perfect world, we would have fantastic credit. We would qualify for rewards credit cards. We would get cash back, or points for using these cards. We would pay them off at the end of the month, and after a few years, Chase, or Discover would be paying for a vacation.
That's how to do it right.
Ed-Jack Dvorak is National Affiliate Liaison at Credit Dr., a national credit restoration company. He works with clients and creditors to improve credit profiles.