How to Keep Your Credit Score Healthy During the Holidays
The holiday season is upon us! In the midst of the busiest shopping season of the year, it can be easy to get carried away with spending and lose sight of your budget and financial goals.
Credit scores are the last thing on most people’s minds during the holidays. However, irresponsible holiday spending can make your score suffer more than you think and lead to a big financial headache. Here’s what you should keep in mind regarding a healthy credit score when it comes to holiday shopping:
Opening New Credit Will Affect Your Score
It can be tempting to take advantage of an instant 15% discount just by opening a new store card, but use caution before proceeding. Each time you open a new credit card, your credit score will take a small hit. This is not a big deal if you open just one or 2 cards. However, if you find yourself opening 4 or 5 for the sake of taking advantage of discounts, you may actually be doing yourself a disservice.
Aside from having your credit score lowered by a few points, store credit cards also often have higher interest rates. What that means is if you can’t pay off the balance in full before the end of the holidays, you may be more than making up for the discount you received in interest rates and paying more for your purchase than if you’d just bought with your debit card or low interest credit card. Only open a new store credit card if it’s a store you regularly shop at. And always make sure you can manage to pay off the balance sooner rather than later.
Consider Your Plans for Springtime
Short-term thinking (that flat screen TV on sale) can lead to long-term problems (being denied a loan for that kitchen renovation you were planning to do). So before you go on a holiday shopping spree by maxing out your credit cards, consider what your financial plans for spring are. Planning to lease a new car, buy a home, or apply for a personal loan? You may want to reconsider how your holiday-season borrowing will affect the health of your credit score.
Remember, how your score is calculated is determined by more than just whether you pay your bills in a timely fashion. The amount of debt you owe makes up 30% of your credit score. When applying for a loan of any kind, your credit score will be under intense scrutiny. To keep your score in tip top shape, avoid getting carried away with credit card purchases. Also be sure to pay off the balance in its entirety before your statement closing date. This way it won’t show up on your credit report.
Don’t Forget Your Bills!
The holidays are busy. Between shopping, parties, family gatherings, and out-of-town excursions, if can be easy to let financial responsibilities fall by the wayside. You may decide that bills can wait, or you may forget about some of them altogether. Not only can this negatively affect your credit score, but you’ll likely incur late charges or extra interest. Make sure to set reminders in your phone or write on your calendar when payments are due. And if you plan to head out of town at any point, ensure everything is paid before you leave.
Remember to never lose sight of your long term financial goals. Consider how credit card purchases and a weakened credit score could affect them. A little extra awareness and effort when it comes to your holiday shopping can mean the difference between a healthy credit score and a bad one. An added bonus? You’ll avoid the Holiday financial hangover that is usually experienced come January. Start the year focused on new financial resolutions rather than figuring out how to pay off newly incurred debt. If you’re already finding yourself in over your head with credit card debt, call Tayne Law Group at (631) 470-8204 to find out more about our credit card debt relief services.