Keeping Your Credit Score Strong Through the Holiday Spending Season
The holiday season is filled with joy, gatherings, and, of course, shopping. But with all the spending on gifts, travel, and festive celebrations, it’s easy to let holiday expenses put your finances and credit score at risk. By planning ahead and using credit responsibly, you can enjoy the season without sacrificing your credit health. Here are some practical tips to help you manage your credit usage and protect your score during this busy time.
1. Set a Holiday Budget and Stick to It
A budget is your best friend when it comes to controlling holiday spending. Start by determining how much you can afford to spend on gifts, decorations, travel, and other holiday expenses. Creating a list of intended purchases can help prevent impulse buys and overspending. Knowing your limits can also prevent you from maxing out your credit cards, which can harm your credit score.
2. Pay Down Balances Early
If you’ve accumulated balances on your credit cards, paying down as much as possible before the holiday season can give you more room to manage new expenses. High credit utilization or using a large portion of your available credit can lower your credit score. Aim to keep your credit utilization below 30% of your available credit to avoid negatively impacting your score.
3. Avoid Opening Multiple New Credit Accounts
The holidays often bring attractive store credit card offers, with promises of discounts or cash-back bonuses. While these can be tempting, opening several new accounts can temporarily hurt your credit score by creating multiple hard inquiries and reducing your average account age. If you’re already considering a specific credit card for its benefits, evaluate it carefully but avoid opening multiple accounts in a short period.
4. Set Up Payment Reminders
With all the holiday activities, it’s easy to lose track of bill due dates. Missing a payment can significantly impact your credit score and stay on your credit report for years. Setting up payment reminders on your phone or using automatic payments can help you stay on top of your obligations. Even if it’s the minimum payment, paying on time can protect your credit score.
5. Be Cautious with Buy Now, Pay Later Options
“Buy now, pay later” options are becoming increasingly popular, especially during the holidays. While these services offer flexibility, missing a BNPL payment or overextending yourself can hurt your credit score. Always read the terms carefully and consider your repayment ability before using these services.
6. Keep an Eye on Your Credit Report
During the holiday season, fraud and identity theft risks can increase as consumers use their credit cards more frequently. Regularly monitoring your credit report for unusual activity can help you detect any issues early. Many credit card companies and financial institutions offer free credit score tracking, or you can check your credit report through annualcreditreport.com.
7. Avoid Making Only Minimum Payments
If possible, aim to pay more than the minimum on your credit card bills to reduce interest charges and debt more quickly. Making only the minimum payment may keep your account current, but it prolongs the time you carry a balance, which can keep your utilization high and impact your score over time.
8. Have a Plan to Pay Off Holiday Debt
If you know you’ll carry some holiday debt into the new year, plan for how you’ll pay it down quickly. Consider setting up a specific debt repayment plan—such as the snowball or avalanche method—to pay down higher-interest debts first. Having a strategy in place can prevent prolonged debt and allow your credit score to recover faster.
9. Remember the Bigger Picture
While it’s great to take advantage of holiday deals and give to your loved ones, maintaining a strong credit score requires thinking beyond seasonal spending. Keeping your credit score healthy can open doors to better loan rates, credit offers, and financial security. Reminding yourself of these benefits can make it easier to prioritize responsible spending.
The holiday season is a time for celebration, not financial stress. By managing credit usage responsibly, setting limits, and keeping an eye on your spending, you can safeguard your credit score and enjoy a more financially secure start to the new year.
If you have concerns about holiday expenses or are looking for ways to manage your finances, reach out to us. We offer resources and financial products designed to help you make the most of the season without compromising your financial health.