Could holiday shopping wreck your credit?

Its common to be inundated with credit card pitches when shopping during the holidays its fair to be tempted by an offer of 15 percent off, a $50 credit, free shipping or whatever the retailer is selling. Those savings could make a huge difference in your budget.

Try not to go crazy, though. Applying for new credit will result in a hard inquiry on your credit report, which will ding your credit scores a little bit. Applying for a lot of new credit cards means a lot of little dings, which can translate into a significant score change, and you will see those effects for the next six or 12 months. This isnt to say that you shouldnt take out new credit cards during the holidays, but you should be strategic about it.

You should definitely check your credit scores before you apply, because you dont want to apply for credit you have no chance of getting, and you also want to know if losing a few points is more damage than youre willing to absorb right now. You can get two of your credit scores for free on Credit.com with updates every 30 days so you can see how your actions affect your scores over time.

High Credit Card Balances

Youre probably going to spend more in November and December than you do most other months, and thats fine. Ideally, youve saved for the increase in spending or have adjusted other budgets accordingly so you can pay your credit card bills as planned.

Still, just because you can afford higher credit card bills doesnt mean you should rack up the charges without a second thought. You may want to spread out your spending among different credit cards, because your credit utilization is calculated not only from your overall credit limits and overall balances but also on individual cards. You may also want to spread out your spending across several billing periods or pay your balance multiple times within a bill cycle, so whenever your balance is reported to a credit bureau, it remains as low as possible.

Experts generally recommend your credit card balances making up less than 30 percent of your credit limit, but the lower, the better. You can also check your credit utilization when you get your credit scores on Credit.com.

Going Into Debt

The holidays may be the most tempting time of year to overspend. If you drive up your credit card balances to the point you cant pay as much of the bill as youd like, youre going to have to make some adjustments in the coming months to bring your debt levels down, which in hindsight, may not be worth the joy you felt spending that money in the first place.

Having credit card debt is not itself a bad thing for your credit, but ever-growing balances are. It goes back to the credit utilization thing. If you get to the point where you cant even afford the minimum payment, youre going to start producing a negative payment history, which is even worse than having high credit utilization.

Youve heard it before, but well say it again: Plan as best you can so you dont overspend and go into debt during the holidays. Sure, its a challenge, but try to think of the long-term impact on your finances. Getting out of credit card debt can take years you can see exactly how long using this free calculator and bad credit can follow you for even longer. Keep that in mind these next couple months.

More from Credit.com

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Does Checking My Credit Score Hurt My Credit?

How to Apply for a Credit Card after Bankruptcy

If you’ve declared bankruptcy recently, it may feel like you’ll never bounce back. The bottom has fallen out of your credit score, and the seven to 10 years it takes for a bankruptcy to fall off your record can seem endless.

But over time, responsible use of credit will show lenders that you can be trusted to pay off what you borrow. Applying for a credit card will get easier, and your options for other kinds of credit,Ā such asĀ mortgages and car loans, will increase as well.

Get your credit report

Before you look at how to apply for a credit card, you need to know exactly what card issuers are going to see when they run your credit. You can get a free credit report using AnnualCreditReport.com, but you’ll probably have to pay to get your score — unless your bank or another financial institution offers it for free.

If your score is under 630, your credit is still poor after your bankruptcy, and you might be better off applying for a card aimed at people with bad credit. Such cards might require a refundable deposit, but they offer an opportunity to show your improved bill-paying mojo now that you have a clean slate.

Avoid future problems

Now that you’re out from under the debt that got you into this position in the first place, it’s the perfect time to implement some good habits that will help you avoid filing bankruptcy ever again.

  1. Don’t bite off more than you can chew. Make sure your credit card debt stays below 30% of your available credit to show lenders that you’re not close to maxing out your cards — this will keep your credit score nice and healthy.
  2. Pay your bills on time. Starting out with only one card after a bankruptcy will make it easier to keep track of monthly payments. Payment history is worth a whopping 35% of your credit score, according to FICO.
  3. Find great health insurance. Medical bills account for the majority of personal bankruptcies, according to NerdWallet Health. You may have found this out the hard way. Making sure your health insurance is top notch will protect your finances going forward.
  4. Start an emergency fund. Even with great insurance, emergencies happen. Keeping an emergency fund equal to one month’s living expenses can help you weather a crisis without racking up more debt. Over time, building that fund up to six months of living expenses is even better.

Next step

Now that you’ve survived a bankruptcy, you’re in recovery mode. Filling out a credit card application is part of that process because careful use of credit will bring your score back up.

But only apply for credit cards you actually need — the last thing you want is to tempt yourself to overspend at this critical moment.

Image via iStock.

RadioShack Is Running on Credit Derivatives

A good general principle in thinking about derivatives is that real effects tend to ripple out from economic interests.This is notalways true, and not always intuitive: If you and I bet on a football game,that probably wont affect the outcome of the game. But most of the time, in financial markets, it is a mistake to thinkof derivatives as purely zero-sum, two-party bets with no implications for the underlying thing. Those bets dont want to stay in their boxes; they wantto leak out and try tomake themselves come true.

Here is a Bloomberg News story about RadioShack credit derivatives that I enjoyed. The basicbackgroundof RadioShack is:

  • It is in some financial distress, having lost money in each of the last 11 quarters and having recently hired a restructuring consultant as its interim chief financial officer.
  • It is a small company, these days, and it has only $841 million of debt as of November($325 million of bonds and the rest in three bank loans). Being in distress, those bonds trade at, oh wow, under 20cents on the dollar.
  • For idiosyncratic reasons, having to do with indexes, there are a lot of credit default swaps outstanding on RadioShacks debt, now about$26 billion gross and $550 million net notional.

So in the near future, RadioShack either will or wont default on its debt, with the market odds implying that it will. If it does default, people who ownthe debt will lose money; if it doesnt, theyll make money. Same with the credit default swaps: If RadioShack defaults, and you had previously bought CDSfor like 60points upfront — paying $6 million for $10 million of CDS notional– then you make a lot of money. (Like $2.5 to $4 million of profit on your $6 million investment. ) But if RadioShack doesnt default, and you had previouslysoldcredit default swaps for $6 million, then you get to keepthe $6 million when your swaps expire.

This creates incentives. Here are the incentives:

  1. If you bought a lot of CDS (long protection/short credit), then you should try to getRadioShack to default.
  2. If you sold a lot of CDS (short protection/long credit), then you should try to getRadioShack not to default.

Thing 1 is sort of a famous thing, and often thought of as Bad. The idea is that you can buy some of RadioShacks debt (long credit), buy even more CDS (givingyou a net short credit position), and then be a meanie with your debt, refusing to negotiate with the company to avoid a default because your incentives are dominated by the CDS position. So instead of being a constructive lender trying to help your borrower survive, youre an evil emptycreditor trying to burn down the house to collect the insurance, in the more or less officially sanctioned metaphor.

But Thing 1 can also be Good. I mean, there is some debate over the goodness of the Codere trade, but I hope theres none over its beauty. It is objectively beautiful. It even made the Daily Show.A reminder:GSO Capital Partners (the credit unit of Blackstone)and Canyon Partners owned a bunch of Codere debt, and a bunch of credit default swaps on Codere, a Spanish gaming operator. And they did in fact driveCodere into default so they could get paid out on their swaps, as Thing 1 predicts. But they didnt do itby being meanies with the debt. Quite the reverse: They agreed to refinance Coderes debt on favorable terms, in exchange for Codere agreeing to be two days late on an interest payment to trigger the CDS. GSO and Canyon made moneyon the CDS, and used some of that money to, in effect, subsidize the loan to Codere to keep it afloat. Everyone wins! Except the CDS sellers. Who lost. How unfair for them.

But of course, they have their own incentives and can do their own thing. Thats Thing 2: If youve sold CDS on a company, you should try to make the company not default. And thats exactly what RadioShacks CDS writers did:

“The sellers of the protection built up quite a large war chest, and it took a relatively small amount of money to keep the company going,” said Peter Tchir, a former credit-swaps trader who is now head of macro strategy at Brean Capital LLC in New York. “They have huge incentives to keep the company alive to not trigger the swaps.”

That provided RadioShack’s biggest shareholder, Standard General LP, a potential pool of lenders when it arranged the loans in October. The financing gave the retailer enough cash to stock up for the holiday season while negotiating with other creditors that are blocking a plan to close underperforming stores.

The CDS writers made a lot of money selling CDS, and get to keep it if RadioShack doesnt default before their CDS expires.So they used some of that money to subsidize a loan to RadioShack to keep it afloat. Everyone wins! Except the CDS buyers. Who lose. How unfair for them.

I mean,its not that unfair: The CDS buyers bet on a default, and RadioShack has not (yet) defaulted, so they havent won their bet. But they think theyshould havewon their bet, because this CDS-funded financinglooks a little like cheating: The people on the other side of the bet have interfered with the game. So the CDS buyersasked International Swaps and Derivatives Association to declare a default, arguing that the new financing was structured with apurpose to manipulate the CDS market (ie, to avoid triggering CDS contracts with a termination date ofDecember 20, 2014). I dont know exactly what manipulate means in that quote, but anyway ISDA declined the request.

Notice the pleasing symmetry between the Codere and RadioShack situations. If you are short a companys credit via CDS, you should want it to default, and one way to do that is to pay it to do a harmless quickie default to trigger your CDS. If you are long the companys credit, you should want it not to default, and one way to do that is to help it get financing to avoid default. Either way, if you have a big enoughbet on what the company will do, you should be willing to spend some money to make sure the company does it.

Now, Codere was a lovely trade, and RadioShack is a lovely trade, but the world still awaits the Hegelian synthesis of the two.I want to see a financially distressed company with a lot of CDS outstandingrun an auction todecide whether to default or not. CDS writers could offer favorable financingterms to keep the company afloat without a default. CDS buyers couldoffer even more favorable terms to keep the company afloat with a quick harmless Codere-style default. And then, you know, theykeep bidding. Theyre just giving the company each others money. Whoever wants it more will offer the best terms.

Evenwithout that synthesis, though, there are some interesting lessons from the RadioShack situation. One is:The Coase Theorem works pretty well in finance, which is I guess exactly where youd expect it to work. Companies end up defaulting or not depending on who values what outcome more. If theres a lot of money at stake on not defaulting, then some of thatmoney can beused to keep them from defaulting.

But thats a little unsatisfying, because, in the CDS market,theres exactly as much money at stake on RadioShackdefaulting as there is on RadioShack not defaulting. Which brings up arelatedlesson: Manipulation, whatever it means, is often harder thanit first appears, because the people youre manipulating against have their own incentives to manipulate against you. So John Stewart said that GSOs Codere trade should be illegal, and RadioShack CDS buyers accusedthe CDS sellers of trying to manipulate the market. But, again, the Codere and RadioShack trades arethe opposite trades. Perhaps theyre both manipulative, sure, why not. But the two sides can manipulate against each other, andin expectation the manipulations and counter-manipulations will cancel each other out and youll get the economically correct result.

One other lesson here goes something like this: Emptiness is in the eye of the beholder. If you think of CDS trading — especially naked CDS trading — as socially useless financial speculation that doesnthelp real companies raise real money for real investments, what do you make of this deal? The CDS writers on RadioShack were long RadioShack credit: They were bettingreal money in RadioShacks creditworthiness. And, while at first the CDS writers were not as directly invested in RadioShack as its actual lenders were — they didnt bet on RadioShack by actually giving it money — they had similar economic interests, and ended up in a similar place, with similar real-world effects. In fact, the CDS writers ended up as lenders to RadioShack. The derivative turned into the real thing.

  1. Bloomberg says that theyve had a high of 18.75 and a low of 15.125 today.

  2. Oh,its more complicated than that; a default would presumably lead to a big restructuring that might actuallybe better for investors than limping along would be. And everything depends on where they bought the debt, etc. But you know what I mean.

  3. Bloomberg News:

    In September, a swaps trader could have sold RadioShack default insurance through Dec. 20 for an upfront payment of $3.65 million on every $10 million of protection. Contracts protecting the same amount through March would have paid $5.3 million, while swaps lasting a year paid about $6 million. As long as the company keeps paying its obligations through the contract’s expiration date, the swaps traders pocket the fees.

  4. I mean, if it defaults, then you get back 100 points, minus whatever the recovery on the bonds is. That is a vexed subject: The bonds are worth less than 20 cents on the dollar now, and would presumably be worth even less in default. On the other hand, there is always the threat ofweird CDS auction dynamics when the CDS notional is bigger than the bond notional. But assuming the recovery in default is somewhere between 0 and 15 points, then the CDS payoff will be between 85 and 100, and so if you paid 60 points up front then you make 25-40 points of profit.

  5. I mean, ISDA actually criticizes the analogy:

    Recently, a simplistic analogy has surfaced and been repeated that compares CDS to fire insurance.People who use this analogy point to insurance law prohibiting individuals from buying insurance on a neighbor`s house so that they will not burn it down to collect the insurance proceeds.Under this analogy, writing naked CDS is equivalent to buying such insurance and committing arson and should therefore be banned.

    The analogy leaves some important points unsaid: How, for example, can buyers of naked CDS actually burn down the house?It is important to remember that for every buyer of CDS there is a corresponding seller who benefits when the reference entity’s credit quality improves.It is unclear how such activity alone can lead to a default by a sovereign government on bonds it has issued.

    ButJohn Stewart endorsed it, so.

  6. I mean, in expectation, but not always in practice. Still, this haslong beenmy sneaking suspicion about Libor:A whole lot of banks seem to have fudged their Libor submissions to help their derivatives positions, but theres no reason to think that all their derivatives positions went the same way. So maybe Libor ended up being more or less fine, because the banks who manipulated it up were canceled out by the banks who manipulated it down.

To contact the author on this story:

Matt Levine

at mlevine51@bloomberg.net

To contact the editor on this story:

Tobin Harshaw

at tharshaw@bloomberg.net

5 money-saving credit hacks for the holidays

Financial blogs and credit repair sites are full of dire warnings about overusing plastic during the holiday season. After all, if you blow your budget, you could end up paying for Christmas 2014 well into the coming year. But there are also smart ways to use plastic. In fact, these 5 holiday credit hacks can help you spend less on holiday shopping, without sacrificing your gift list.

Accept the offer: The holiday season is rife with cash back or discount offers for consumers willing to pay with newly-issued plastic. Amazon, for example, was offering shoppers a $40 credit if they applied for the companys branded credit card this week. Retail stores also typical lure in new cardholders with promises of 10 percent to 30 percent off first purchases placed on the in-store card. The smart way to use these offers is to take them during the holiday season, when youve got several hundred dollars worth of goods to buy, says Liz Weston, author of Your Credit Score and The 10 Commandments of Money. With the average consumer expected to drop more than $800 on gifts this season, a 20 percent discount could save a bundle.

Theres just one caveat. Dont charge more than you can pay off within a month or two, particularly on retail cards that typically charge 20 percent or more in annual interest. If you leave a revolving balance on this new plastic, youll eat through the discount savings in less than a year.

Switch your rewards card: If you think youll spend $3,000 in the next three months, it could pay to switch your rewards card too, according to CardHub, a credit card comparison site. Both the Chase Sapphire Preferred card and the Capital One Venture Rewards cards offer 40,000 bonus points to those who charge $3,000 in the first three months, the sites editors note. Those bonus points are worth between $400 and $500 in statement credits for travel expenses, depending on how the points are redeemed. That can take away some of the sting of flying home for the holidays.

But wont applying for all those new cards trash your credit rating? Not necessarily, says Becky Frost, consumer education manager with Experian Consumer Services. If you have good credit and havent opened a bunch of new cards over the past 24 months, adding one or two new cards now wont hurt your score at all. In fact, if you pay off the cards right after the holidays, it could help your credit score, she says.

Why? A key factor in your credit score is your credit utilization. Thats the percentage of debt you have outstanding, compared with the amount you have available. Thus if adding a few cards boosts your available credit by a few thousand dollars, the same amount of debt reduce your utilization. (In other words, if you have $1,000 in debt outstanding and have $2,000 in available credit, youre utilization is 50 percent. If you have $1,000 in debt but $4,000 available, youre using just 25 percent.) The lower your utilization, the higher your credit score.

If youre young and dont have much credit history at all, accepting a stores new card offer can help you establish credit, she adds. The key is to keep spending in check so you can always make the payments on time.

When should you not apply for new credit during the holidays? When youve been on a binge and have lots of new cards, or when youre about to get a big loan, such as a mortgage, says Weston. Although new credit applications typically nick your score by just 5 points per card, when youre about to get a big loan, every point can count.

Use your guarantees: If you bought something early in the holiday season and now realize its cheaper, you may be able to use a little-known credit card perk to recover the difference. Citibank, Discover and MasterCard all offer some type of price protection that allows you to apply for a refund if you buy something and find out later that you could have gotten a better deal. The credit card price-guarantees vary, but the best of them can pay you back up to $500 per item if you overpay for a covered purchase. With the Discover and MasterCard deals, its up to you to watch for lower prices.

With Citis Price Rewind, theyll do the price-tracking for you, once you register the purchase. If a lower price for the same item is found on a retailers site within 60 days, the credit card company will refund the difference up to $300 per purchase or $1,200 per year. But make sure you keep your receipts. Most companies will require them to be submitted as proof that you made the purchase.

Buy discounted plastic: Sure, you know that you can go to GiftCardGranny or any one of a number of other sites to buy lightly-used discounted gift cards, but did you know that a number of retailers sell brand-new gift cards at a discount too? This week Costco was advertising a $100 gift card for BedandBreakfast.com for $65; and $100 worth of cards for a series of popular restaurants, including Wolfgang Pucks, McCormick amp; Schmicks and California Pizza Kitchen, for $80. The recipient still gets a new card worth the face amount, you just spend 20 percent to 35 percent less to buy it.

Delay those and one-for-me purchases: Some 37 percent of American consumers expect to buy themselves a gift while theyre holiday shopping, according to a recent survey by Experian Consumer Services. Thats the sort of spending that can derail your budget and leave you swearing off the plastic when the debt hangover strikes in January.

Theres a better option. If theres something you really want this holiday season, consider dropping a few broad hints. Make up a wish list and leave it out for your friends and family to see, suggests Frost. After all, theyre planning to buy you something anyway. Its better for both of you if its something you want so much that youd buy it for yourself. To be sure, theres no guarantee that youll get the item as a gift, but if you dont — and you didnt blow your budget — youll be able to buy it cheaper during the post-holiday clearance sales.

Milk forecast weighs on kiwi

THE kiwi fell as low as US76.10 cents, trading at US76.21c at 5pm on Tuesday in Wellington from US76.71c at 8am, and US76.43c on Monday. The trade-weighted index dropped to 77.19 from 77.48.

Fonterras board on Tuesday met for their quarterly review of the milk price forecast for the current season, and is expected to update the market on Wednesday. Prices have slumped on increased global supply and heavy stockpiling by Chinese buyers, and economists anticipate Fonterra will have to reduce its forecast below $5 per kilogram of milk solids. That comes as the kiwi dollar is swept up in a downturn for commodity based currencies, with oil, iron ore and copper prices falling. The market is waiting for that information – the kiwi is clearly under duress here, said Stuart Ive, senior dealer foreign exchange at OMF.
We are a commodity currency and we all know theres a pending milk announcement where were expecting the payout to go sub $5. Wednesdays announcement precedes the New Zealand Reserve Banks policy review on Thursday, when governor Graeme Wheeler is expected to keep the key rate unchanged, while trimming his forecast for future rate hikes. Mr Ive said the momentum for strength in the greenback is still intact after last weeks strong payrolls report, and ahead of next weeks Federal Reserve meeting. New Zealand government figures on Tuesday showed spending on credit and debit cards increased in November, with gains in retail purchases of consumable items and on hospitality driving the increase. House sales figures are also expected to be released on Wednesday. On Tuesday, the kiwi gained to 92.49 Australian cents at 5pm in Wellington from A92.22c, and sank to 91.70 yen from 92.91 yen. It declined to 61.98 euro cents from 62.20 cents and fell to 48.74 British pence from 49.10p.

Managing money, marriage when it comes to taxes, credit

Your credit files arent merged after a marriage. Couples dont have joint credit reports or credit scores. You are scored by the credit bureaus based solely on information in each of your individual credit files.

So if you marry a credit-challenged man, you dont inherit his bad credit. You dont, that is, unless you co-sign with him. If you do, and his bad history of handling his bills continues with the new accounts, then, yes, his behavior can affect your credit history.

Still, you are right to be concerned about your future husbands financial readiness. If you apply for credit together for a home, for instance your spouses credit does matter because lenders will want to see both of your credit scores if you need the joint income to qualify.

I recommend you take a premarital class that has a good financial component so the two of you can work out how and why you handle your money differently and develop strategies to handle those differences. By the way, a prenuptial agreement wont help settle the different money styles youll have to live with during your marriage.

This question concerned marriage and money as it relates to taxes:

What do you think about the ways married people are penalized by our tax code? I finally make a high salary, and got married around the same time of my pay increase. All of a sudden we are hit with enormous tax liability! We have a child, but we dont get the tax credit, which is only $1,000 anyway. I did the math and if we were not married and split housing/day care/health care expenses equally, we would pay $8,000 less in taxes. I want a divorce on paper, because the tax code does not seem to think working families are important. I never considered the tax burden wed face when we married, and I actually regret making it legal now. I know that sounds horrible, but really I do.

Do I think the tax code is overly complicated and often unfair? Sure. But Ive been married 23 years and dont regret for a nanosecond my decision, even though it created a larger tax burden. There are so many choices we make that can result in expenditures we wouldnt have if we had made different decisions.

You mention you have a child. This year, in its annual report on the cost of raising children, the Department of Agriculture said a middle-income family parents who earn between $61,530 and $106,540 yearly with a child born in 2013 can expect to spend about $245,340 ($304,480 adjusted for projected inflation) for food, housing, child care, education, and other child-rearing expenses up to age 18. A family earning more than $106,540 can expect to spend $407,820. By the way, this figure doesnt include the cost of college.

Please consider that there are a lot of financial benefits to being married. When it comes to your estate, the tax law favors marriage. So does the gift tax. If you have a traditional pension, retirees can opt to have payments made to a surviving spouse.

Theres a plus to being married when it comes to Social Security. What if at some point you want to be a stay-at-home parent? A lower-earning spouse is eligible for benefits up to 50 percent of the higher earners work record. In the case of divorce, if you were married at least 10 years, you can collect retirement benefits on your former spouses Social Security record if you are at least age 62, unmarried, and if your former spouse is entitled to or is receiving benefits. By the way, the benefits you get have no effect on the amount of benefits your ex-spouse or his or her current spouse may receive.

You should count the cost of your decisions. But some things come with a price thats worth the extra money.

Michelle Singletary can be reached at michelle.singletary@
washpost.com.

4 ways to improve your credit score

LIGHTS TO DISTRACT A FEW DRIVERS, BUT OVERALL TRAFFIC HAS IMPROVED IN THE AREA. IT IS A 3-DIGIT NUMBER THAT AFFECTS EVERYTHING FROM YOUR MORTGAGE RATE TO WHETHER YOU COME BUY A NEW CAR. WERE TALKING ABOUT YOUR CREDIT SCORE. THIS MORNING, AMY DAVIS IS HERE WITH FOUR THINGS YOU CAN DO TO RAISE THAT — WHAT SOME CONSIDER AN IMPORTANT NUMBER. EXACTLY. AS YOU SAID YESTERDAY, YOU CAN ALWAYS PAY CASH, BUT FOR MANY PEOPLE, NOT ALWAYS AN OPTION WHEN BUYING A CAR OR A HOUSE. A PERFECT SCORE IS 850, AND YOU WANT TO GET AS CLOSE AS YOU CAN TO THAT 850 NUMBER. HERE ARE FOUR THINGS YOU SHOULD AND SHOULD NOT DO, BESIDES PAYING YOUR BILLS ON TIME. IF YOURE LOOKING TO DIG OUT OF DEBT, YOU MIGHT THINK CANCELING CARDS YOU DONT USE IS WISE, BUT THAT COULD ACTUALLY LOWER YOUR SCORE. THATS BECAUSE PART OF YOUR SCORE DEPENDS ON THE RATIO OF THE CREDIT YOU USE ON YOUR CARDS TO THE ACTUAL AMOUNT YOU COULD USE. CANCELING CARDS LOWERS THAT RATIO AND THAT WILL LOWER YOUR CREDIT SCORE. NUMBER TWO, DONT OPEN TOO MANY CREDIT LINES AT ONCE. CREDITORS LOOK AT THE AVERAGE ABLE OF YOUR ACCOUNTS. OPENING NEW CARDS LOWERS THAT AVERAGE AND CAN MAKE YOU LOOK RISKY TO LENDERS. NUMBER THREE, IF YOU CHARGE EVERYTHING ON A CARD TO RACK UP POINTS OR REWARDS, EVEN IF YOU PAY IT OFF AT THE END OF THE MONTH, LENDERS MAY FROWN ON YOU. THATS BECAUSE THEY SEE A SNAPSHOT IN TIME WHEN YOURE APPLYING FOR A LOAN. THEY CANT TELL IF YOURE GOING TO PAY OFF THAT HUGE ANT ON YOUR CARD. THEY JUST SEE YOURE VERY CLOSE TO YOUR CREDIT LIMIT AND THATS A NEGATIVE. CONSUMER REPORTS RECOMMENDS TAKING OUT A PERSONAL LOAN TO PAY OFF CREDIT CARD DENT. THEY SAY THE INTEREST RATES ON PERSONAL LOANS ARE USUALLY LOWER THAN CREDIT CARD INTEREST RATES. REVOLVING CREDIT CARD DEBT IS MORE DAMAGING TO YOUR SCORE THAN INSTALLMENT DENT, BUT YOU WANT TO GET THE RIGHT TYPE OF PERSONAL LOAN AND MAKE SURE

I love him, but he’s credit-challenged

ITS HARD enough managing ones own money, but navigating through financial issues with another person can be even more frustrating. I often get questions about marriage and money during my weekly online chats. The following are answers to two recent questions.

What happens when someone with a FICO score of 800-plus marries someone with a score of 400? I anticipate getting engaged soon but am not sure where to start dealing with financial matters. I love my boyfriend, but financial management is not one of his strengths, though it is one of mine. I want to ensure my credit and other related finances are not impacted. Planning to prepare a prenuptial agreement is one first step. What else should I plan to do?

Your credit files arent merged after a marriage. Couples dont have joint credit reports or credit scores. You are scored by the credit bureaus based solely on information in each of your individual credit files.

So if you marry a credit-challenged man, you dont inherit his bad credit. You dont, that is, unless you co-sign with him. If you do, and his bad history of handling bills continues with the new accounts, then, yes, his behavior impacts your credit history.

Unsecured borrowing rises but business lending falls again

Britain’s reliance on consumer borrowing to drive the recovery was laid bare on Monday by figures from the Bank of England showing a 6.4% jump over the year to October.

The rise represented the fastest annual growth in unsecured consumer credit since 2006 and follows a series of reports forecasting a delay in interest rate rises until at least the autumn next year.

Without the threat of higher interest costs in the near future, consumers have made the most of fierce competition among lenders and a price war on the high street to increase spending on credit cards and loans. In particular, the continuing popularity of new cars is tied to enticing cut price loan deals offered by dealerships and manufacturers.

Maeve Johnston, UK economist at Capital Economics, said: “The latest figures provided an encouraging sign that consumers feel more confident to borrow. Indeed, while annual growth in consumer credit remains weak by pre-crisis standards, it has continued to gradually improve.”

Personal loans and overdrafts rose by pound;700m in October while credit card lending increased by pound;400m, the central bank’s figures showed.

“So total consumer credit rose by pound;1.1bn, a touch more than the pound;0.9bn increase in September. We expect further sustainable rises in consumer credit over the coming months,” she said.

Net borrowing remains at low levels compared with the boom years, though much of the decline relates to older homeowners paying down mortgage debt rather than across-the-board restraint in borrowing.

Howard Archer, chief UK economist at IHS Global Insight, warned that rising consumer credit meant that more households would be vulnerable to financial stress following an interest rate increase.

He said: “With debt levels relatively high, there is the concern that even a small rise in interest rates during 2015 could cause problems for a significant number of people. However, it currently looks unlikely that the Bank of England will raise interest rates before the latter months of the year. Furthermore, the Bank has indicated that still high consumer debt levels are an important factor why it will only raise interest rates gradually over the longer term,” he added.

The Bank figures also showed a further slowdown in mortgage lending and a second successive, and deeper, dip in net bank lending to business outside the financial sector.

Net lending secured on dwellings increased by pound;1.5bn in October, less than the monthly rise of pound;1.7bn in September and continuing a trend since the spring of declining appetite for homebuying.

Net lending to businesses fell by pound;1.9bn in October after a drop of pound;813m in September. These figures will be seen as a disappointing turnaround by ministers, who were encouraged by increases of pound;877m in August and pound;1.2bn in July.