Credit for Christmas

14 Dec 2006 | Cpl. Brandon R. Holgersen

As Christmas approaches and people start to spend money on gifts it is important to keep finances under control especially when it could affect a person’s credit.

Credit is about trust, said Roy Ells, the financial specialist, with Marine Corps Community Services Health Promotion Branch. Building credit is essential in this economy but a person needs to know how to manage their debt and spend wisely.

One good way to build credit is to get a general purpose credit card through a person’s credit union or bank, said Ells. A person should use the card on small items and pay the bill right away so the balance remains at zero. This will show the lender usage of the card and a good payment history.

A credit card can be better than a personal loan because a person must resist the temptation to spend beyond their means and make regular payments, said Ells. This will show the lender that they are responsible.

Another way to build good credit is buying a car, said Ells. If a service member buys a car he can afford and sets up an allotment so that payments will never be missed. This ensures that his credit score will stay good.

People usually get in trouble with debt because they only pay the minimum payments but continue to incur more debt, said Ells.

“We mostly use our credit cards because we want something instead of using it for emergencies,” said Ells.

It can have a snowball effect, said Ells. One late payment causes fines to be incurred and a person has to pay more money and that payment becomes late and so on. Finance companies can also get a person in trouble because they charge the highest interest rate they can and add fees to the cost of the loan to get more of a Marine’s money.

The best way for a person to start to work themselves out of debt is to carefully budget their finances, find out where their money is going and redirect those funds to pay off their debt, said Ells. When they finally dig themselves out of debt, it will still be another 18 months to two years to get their good credit score back.

Debt and credit is also a big issue around the holidays where people spend large sums of money and incur more debt than they probably should, said Ells. It is important to remain realistic on what you can afford.

A good way to have money for the holidays is to set up a holiday savings account at the beginning of year and put a regular payment into it so when December comes a service member will have enough money to buy presents for friends and family.

“All of us have to learn that this is a life time process,” said Ells. “It’s not just young people that get in trouble with debt.”