Don't Let 'Old Sofa Syndrome' Sink Your Credit

old sofa with clothes used by...

By Gerri Detweiler

It is such a well-known phenomena that credit counselors have a name for it: "Old Sofa Syndrome." And if you're not careful, it can wreak havoc on your budget -- and your credit scores. New homeowners are particularly vulnerable, but so are those who have lived in the same place or with the same furniture for years and decide to replace "just one thing." Counselors with Consumer Credit Counseling Service of San Francisco warn clients to beware of Old Sofa Syndrome, or OSS, in their new homebuyer classes. Rick Harper, senior vice president CCCSSF, explains:

(We) remind them that often new homeowners run up their credit card balances soon after they close on their new home. This is especially true for first-time homebuyers. All of a sudden the old sofa doesn't quite look right in the new living room. So out goes the old sofa and in comes the new sofa, which is financed by the credit card. Then the old drapes don't look right behind the new sofa and the process is repeated over and over. Suddenly within a few weeks or months there is a huge credit card balance competing with the new mortgage payment and this is dangerous.

Large balances on credit cards can affect a consumer's credit score dramatically. In most scoring models, the debt consumers carry account for about a third of their credit scores, and one of the important factors evaluated is how close the balances on their revolving accounts (like credit cards) are to their credit limits. It's known as "utilization." Generally, the lower their debt in relation to their available credit, the better for their credit scores. Most consumers will be fine if they keep balances below 20 to 25 percent of their available credit, though 10 percent or lower is ideal. (You can find out how your debt is affecting your credit scores with a free tool like's Credit Report Card.)

The cure for Old Sofa Syndrome: Take a deep breath, and wait. Figure out whether the purchase fits into your budget, and really think about what will happen once you replace that one item. Harper says that he and his counselors ask household members to "agree not to make any major purchases for at least six months so they can adjust to their new mortgage payment. This will help insure their long-term homeownership sustainability."

What about times when you have to make a purchase you haven't saved for; the washing machine or refrigerator goes, for example?

"If you do end up spending more than you anticipated, be sure you put a plan in place to pay down the balance," Tom O' Donnell, senior vice president of Chase says. He points out that Chase Blueprint offers a feature that helps cardholders save on credit card interest and pay down balances faster. Or you can use a credit card calculator to figure out how much you'll have to pay each month to pay off your balance in a specific time frame.

I experienced this syndrome firsthand recently. I had to buy some dining room chairs to replace ones our foster kittens destroyed. Soon I found myself looking for an entire new dining room set. Fortunately I didn't find exactly what I was looking for, and eventually decided to stick with what I have. But the replacement chairs I settled on will clash with the curtains, so those will have to go. Hopefully I can stop there.

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