It’s time to focus on keeping your customers

Credit healthSherene Costanzocredit score, department store cards, building credit Too many department store cards can hurt your client's credit score The savings and discounts offered by department stores are everywhere. It seems they offer a discount for applying every time they ring up a customer. How do you decide where to draw the line? Department store cards do not weigh as much toward your credit score as a bank card such as MasterCard or Visa. It is most definitely better for your credit score when you hold a MasterCard or Visa with a major bank. If you cannot get approved for a major credit card, then try applying for a department store card. Many times, they are more likely to approve you for a small credit limit. This allows you to build some credit history. Be sure to make your payments on time. Within a few months, you should be able to get approved for a major bank Visa or MasterCard. If you will no longer use the department store card, go ahead and close the account. If you are not approved for a department store card, you can try to build credit with a secured credit card from a bank. The bank will usually offer you a small credit limit of $200, but you will have to give them $200 for security. So how should you handle those offers for discounts and promotions at department and specialty stores? You should only take advantage of special offers if you are good at managing your credit card bills. Don't fall for every offer. Pick and choose which ones will benefit you the most. For example, if you are doing a major remodeling or refurnishing in your home, you may consider an offer for no interest or payments for one year. However, with offers like these, you must always read the fine print. Most of these types of offers require you to pay off the balance in full before the expiration date or they will back-charge you interest for the entire year. They will also cancel the special offer if minimum monthly payments are not paid on time and will raise your zero percent annual percentage rate to some ridiculous rate like 29.5 percent. When a store offers you a 10 percent discount for opening a card with them, only consider opening a card if you are making a large purchase - usually $1,000 or more. Take advantage of these offers only when buying furniture, appliances, electronics or what are considered large ticket items. Remember that having too many store credit cards open can actually hurt your credit score, so choose wisely. If you aren't currently using them, close them out. Good histories on store credit cards don't help your score as much as using a major bank credit card. As a rule of thumb, it is best to keep one or two major bank cards open for use. Anything else just creates more bills to pay on time and keep in order. This causes more risk for extra fees and interest too. If you shop in one store frequently, then it may benefit you to hold their credit card and take advantage of discounts on merchandise for using that store's credit card. Some stores even offer points or rewards for frequent users. These can really add up for frequent shoppers. Store cards tend to charge higher interest when compared with bank cards. Many times the store cards will work with their customers when it comes to being late. These stores generally offer lower credit limits than bank cards, so consumers usually carry smaller balances and therefore have smaller minimum payments than on their major credit cards. As with all credit cards, you must pay on time and keep balances below 40 percent of the credit limit. If you have a history of making late payments or not keeping your bills organized, then you are probably better off avoiding store cards altogether. Even though it may save you now, it could cost you more money in the future, especially if it ends up damaging your credit score. Tips to help keep healthy credit include: -Understand your credit score; -Keep a balanced mix of revolving credit cards and installment loans; -Always pay bills on time; and -Keep your credit balances low. Also, pull your credit at least once or twice a year with all three credit bureaus to check for fraud or errors, and dispute any old or negative information. Accidents and hardships happen. Call your creditors to ask for courtesy removals; if you have a decent credit history, they may remove late pays from your credit reports. Many credit restoration companies assist consumers with these types of services for a fee. If you don't have time to do it yourself, contact a reputable credit restoration company to assist you. Sherene Costanzo is vice president of Credit Consultants Inc. She may be reached at (888) 522-7007 or e-mail [email protected]