Maintaining Your Credit Score During the Holidays

11/20/24  | Kinsey Love, Digital Marketing Manager

The holiday season can be a lot of fun. Giving and receiving presents is a time-honored tradition among friends and family. However, it’s important to keep things in check, even with all the spending euphoria that comes with the season.

No one loves the holidays as much as credit card companies — that should tell you something. According to MoneyGeek, American consumers spent an average of $1,288 on holiday-related purchases, 68% of which was charged to credit cards. Buy Now, Pay Later services such as Klarna, Afterpay and others are expected to bring in a record $18.5 billion in sales just this holiday season alone. And overall, the National Sales Forecast is expecting holiday spending to reach $990 billion this year. It won’t be long before Americans are spending more than $1 trillion on holiday shopping.

While it can be tempting to get your loved one the gift of their dreams — and worry about the cost later by throwing it on a credit card — doing so could set the stage for a difficult financial situation, even with the best-intended New Year's resolutions.

Here’s how to avoid a credit score catastrophe during the holiday season:

 

Why Is Credit Important?

Before we dive in, let’s go over some basics about credit. Your credit score matters at every stage of your life and has a big impact on your financial stability and access to opportunities.

Here’s why:

 

Why Does a Good Credit Score Matter?

Where you live, what you do for work, and even what you pay for some of your more expensive monthly bills can be affected by your credit score.

First, credit score impacts your terms on loans, mortgages and additional lines of credit. When it comes time to buy a car or home, you will want the more favorable rates that come with a good credit score. 

Even if you don’t buy a home, a strong credit score can also factor into rental applications. In addition to proof of income, many landlords check credit reports. A good credit score can make it much easier to land the home you want. Insurance companies also use credit reports to determine auto and home insurance premiums. Better credit may lead to lower rates.

Not to mention, your credit may play a role in your career opportunities. Some employers run credit checks as part of the hiring process, especially if the job involves financial responsibilities. A good credit score—or a bad one, for that matter—can influence their decision to hire you. 

 

How To Maintain A Good Credit Score

The best practices for maintaining a good credit score are simple enough: pay your bills on time and keep your balance low. Additionally, you should be mindful of new credit applications—don’t apply for the store credit card every time you check out at a department store at the mall—and monitor your credit report regularly. 

Credit is monitored by three major bureaus; Equifax, Experian and TransUnion. The two most widely used credit scoring systems, FICO and VantageScore, evaluate your credit on a scale of 300 to 850, with the latter being the best possible score.

On this scale, a score of 700 or above is considered good, with a score of 800 or higher being excellent. Most consumers find themselves somewhere between 600 and 750. A score of 580 or lower is considered poor. Consumers in that range may have trouble obtaining credit and will face the highest interest rates.

Don’t fall into the trap of thinking you’ll just fix your credit score later while you miss payments or run a bloated balance on your credit cards. Digging yourself out of a hole can cause a lot of stress or at a certain point become impossible, forcing you to make a major financial decision, such as declaring bankruptcy.

 

Budgeting For Christmas

Christmas or holiday season gifts can be a tempting way to show someone how much you love and care about them. But don’t get it twisted; good cheer isn’t measured in dollars and cents. Still, if you want to get presents for the people you love, you can do so in a way that doesn’t send your credit score into a downward spiral.

The best way to get started for holiday shopping is to create a budget. A wise approach may be to jot down a list of friends and family members you’d like to shop for, set a fixed amount of money you can reasonably spend in total, and allocate the amount accordingly.

Remember, some of the gifts can cost little or nothing at all. No matter what, your recipient will treasure a simple heartfelt gesture. Don’t be afraid to spend time on handmade gifts. Those can be even more meaningful.

 

Budget-Friendly Shopping Tips

First of all, you shouldn’t spend what you don’t have. But to maximize the shopping funds you do have, take advantage of holiday sales by getting started early. Black Friday is one of the best times to get the gifts you have your eyes on for someone you love. Take some time to research the best deals, either online or in-store before setting out on your shopping expedition. You might also find some good bargains on gently used goods on Facebook Marketplace or other online classifieds.

Don’t let the allure of a good deal let you go overboard, however. Stick to the budget, even if the sales seem irresistible.

 

Make A Stressful Season Less So

The holidays are stressful enough, even without the added weight that follows excessive credit card spending. 

By following the tips above, creating a list, setting a budget and finding inexpensive yet thoughtful ways to spread holiday cheer, you’ll save yourself the headache you'd feel when the credit card balance comes due. 

Enjoy the holiday spirit without breaking the bank. Your friends and family — and your credit score — will thank you.

For more financial guidance, please visit an Altabank location near you.