By John Adam Hackney - email
DALLAS (RNN) - Want a happy new year? Experts say one of the best ways to achieve that goal is to pay down your debt and start planning for Christmas 2011 right now.
Gary Sheppard, vice president of Corporate Security for Texas Banks, said the first step is to obtain a copy of your credit report so you know where to begin.
Consumers are entitled to one free credit report each year as part of the Fair Credit Reporting Act.
"I recommend people go for it," Sheppard said. "It also enables consumers to see who is running credit reports on you and it helps to prevent identity theft."
Americans have a long way to go in reining in their debt and fully recovering from the Great Recession. A recent report by the Fair Isaac Corporation (FICO) shows that one-fourth of Americans have a poor credit rating, a score of 600 or below.
The latest figures from the Federal Reserve indicate that consumer credit card debt increased by $6.5 billion in the third quarter of 2010.
If you're one of those who ended 2010 in significant debt, Sheppard says there are steps you can take to relieve your financial stress.
First, pay your debt in the order of the smallest debt to the largest.
"Also, making minimal payments will get you nowhere because the interest is going to kill you," he noted.
If you used your credit cards to pay for Christmas, the time to pay those charges off is now.
Hairdresser Christina Carrington said she typically avoids credit cards for most holiday purchases.
"I try to even out the way I pay for my gifts, especially during the holidays," she said. "I probably spent $1,000 in cash and $500 with credit cards for gifts."
A great way to get a jump on the year is to open a Christmas account now. Doing that will help keep your budget in check and reduce your stress next December.
Take a look at what you spent for Christmas this year and budget accordingly.
"I didn't open a separate account, but I did have the self-control to start saving up money for Christmas around October," Carrington said. "I also plan to have any credit card debt from holiday spending paid off by Feb. 1 at the latest."
Experts warn against opening new cards during the holidays in order to save money on a store purchase. Don't close your account once you pay off your balance, however. That could ding your credit score.
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