By Mike Miles
Clark G says “Tis the season to be merry”! Know that one? If you can’t guess that Christmas movie…well, I’m not sure we can be friends anymore. Even if you’re not a savvy movie quoter though, you can still be a savvy shopper this holiday season, so we’ve compiled a few tips for you to remember as you do your last-minute shopping:
Number One: Shop, but not recklessly. I say this for two reasons. First, the economy is heavily dependent on consumer spending, so if we all shop and spend less, we (as the market) could miss forecasts and negatively affect long-term interest rates. Second, try to shop around prices and don’t just shop blindly. Plan purchases, find the most competitive price, and ask your preferred vendor to match it, if possible.
Number Two: Watch out for “counter discounts.” Do not – unless you absolutely need to – accept an offer from a retail associate asking if you want to open an account just to receive 10 percent, 20 percent or more off on your purchase. Depending on the size of the purchase, the tradeoff just isn’t worth it. From a credit score perspective, it’ll constitute a hard hit to your credit and a lower credit limit will likely be issued for the purchase you are making. It’s also worth noting that interest rates on these types of accounts are often more than 20 percent, so they’re hardly the most attractive credit offer out there.
Number Three: If you’re leveraging your credit cards, try to spread out your purchasing over multiple. Some people have plenty of credit available on a credit card (e.g., a $20,000 limit card that never has more than $1,000 owed). For those who don’t have individual card limits like those in our example, you may want to make sure you’re not exceeding a billing cycle balance over 30 percent the card limit. For example, if your credit card limit is $1,000, try to avoid having an outstanding balance greater than $300. It’s easy to get carried away using credit cards this time of year and even easier for charges to add up quickly. Even though you may plan on paying the full balance off once the statement is issued, the balance still cycles as normal and those cycles are reported the same way to the credit bureaus. Any credit balance exceeding 30 percent of the limit usually warrants a score reduction, so be careful!
These tips will help you if you’re in the middle of a mortgage loan process or about to start one since lenders pull credit at the onset of a loan application. Lenders also do so periodically at the end of underwriting to ensure no new debt is established during the process. Avoiding credit inquiries, opening new accounts, and monitoring your balances can protect your scores and eliminate any underwriting issues.
Have fun and enjoy this time of year. If you’re about to start your home loan search, I’d be glad to provide you a comprehensive analysis, so feel free to call anytime at 913.745.7000, or email me at [email protected] My team at Fountain Mortgage would love to help answer any questions you have regarding your mortgage needs.
This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain Mortgage today.
Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268