How To Rebuild Credit When Summer Vacation Debt Catches Up With You

With summer now officially winding down and the kids preparing to head back to school, many parents across the country are now seeing their financial decisions of the summer impact their bottom lines. Whether they spent a little more because schoolchildren were home all day, took trips to local attractions or even went on getaway vacations, spending likely ticked upward, which in turn could have a negative impact on families' credit scores.

No matter how much you spent during the summer, if you put any of those purchases on your credit cards, they may have started to accumulate interest which in turn can lead to ballooning debt totals. That could endanger your finances and even serve to undo your previously good credit scores. Thus, before you finalize your back-to-school plans and make any last-minute shopping trips, you may need to do a little work to rebuild the standings which you might have had more of an excuse to neglect from June to July, and even into early August.

Where to get started fixing your missteps
The first thing you'll have to take into account after taking on credit card debt, whether it was a large amount or a smaller one, is how much it has impacted your monthly costs. For example, you might want to think about what your minimum balance requirements looked like during the spring, when the kids were still in school, and compare them to what you now face.

If they've gone up, for example, from $50 to $75 per month, and you normally contribute $100 toward your outstanding balances, you're still making headway and cutting into your debt. However, you're not doing as much to chisel away at it, and you're also likely dealing with far more sizable balances overall.

Relatively new federal laws mandate that any amount you contribute toward your credit card debt above what is listed as your minimum payment must be applied by your lender toward your principal balance, rather than any interest charges you have accrued in the past. But using the previous example, if your minimum payment has increased to $25, that much is now being applied to your now-larger balance in a different way, meaning your debt shrinks more slowly even though you're still doing the right thing and trying to stay on top of your debt overall.

Why is that a problem? Well, the simple fact is that the amount of debt you're carrying (when compared with the total value of your credit limit across all accounts) makes up 30 percent of your credit score. This means that the more debt you have, the lower your rating will be, which can become problematic down the road. In general, your standing will start to drop when you owe more than 30 percent of your combined limits, and as such you might need to make greater contributions to get your summer debts back below that acceptable level.

Another potential threat to your good credit score
Of course, when your minimum payment levels rise, it might also make it more difficult for you to reach those new requirements, and thus put you in a position where you might have to miss a deadline.

That, however, would be the biggest mistake you could make when it comes to handling your accounts. For one thing, your lenders will likely apply penalty interest rates and late payment fees to your debt, which will only serve to make them more difficult and potentially frustrating to deal with in future.

But perhaps more important is the fact that your payment history will suffer as a result of the missed deadline, and that factor is the single largest that goes into determining your scores. In all, it makes up a full 35 percent of a rating. It is for this reason that falling behind on your payments is the cardinal sin of maintaining a strong credit rating, and why you should try to avoid such an action at all costs.

Unfortunately the only kind of non-drastic credit fix action you can take if you've already made such a misstep is to get your payments in on time every month going forward. This will smooth over the issue, and prove it was a one-time occurrence, but you cannot have it stricken from your record any time soon.

Finally, when you're trying to protect or rebuild your credit standing, one thing you should always remember to do is regularly order your credit reports. Doing so can help you spot any unfair markings which could be unduly harming your scores, but working with a credit repair law firm may be able to help you sort out the issue expediently.