The holidays often involve a lot of chaos, stress, and absent-mindedness. They also involve a lot more spending than you or your budget is used to in a year. As many consumers are still apt to wait until the last minute, financial decisions during this time are not always contemplated as carefully as they should be.
As a result of all the events surrounding the holidays, it can be easy to hurt your credit without truly realizing the extent of the damage until the New Year. Here are a few things to keep in mind about holiday spending and how you can use the holiday season to actually improve your credit rating:
Use Credit Cards Wisely
Using credit cards can actually be advantageous to your credit but there are caveats attached. In order to use credit cards wisely, you need to first know how much you can afford to spend on credit. This requires a budgeting system so you will be assured that you always have the cash to pay off credit card balances each and every month on time. The more often you eliminate the full balance within the billing cycle, the less you have to pay in finance charges and the more stability your credit history will become.
If you plan early about how much you’d like to spend for each person you buy gifts for and all of the other holiday festivities you are footing the bill for, you can establish a year-long savings account and accrue the amount you need during the holidays. Auto deposits into a Christmas Club account starting in the New Year is a great way to prepare for next year. Even if you neglected to save for a long period of time, you can still stash some cash away starting now rather than having to come up with a lump sum of cash right before the holidays. This will help eliminate overspending on credit cards which you can’t afford to pay off.
Pay Off Your Debts
While most people head to the mall for the after holiday sales with their Christmas gift money in hand, it can be a wiser choice to take the cash you received from friends and family and use it to reduce your debts. The more debt you can erase, the higher your credit score can go. Just be sure not to close out credit card accounts when you’ve paid them off as doing so can bring your credit score back down.
Don’t Neglect Financial Duties
One of the reasons consumers suffer with low credit scores is due to their neglect of on-time bill paying. It is important to stick with your regular personal financial schedule for paying bills and staying organized amidst the chaos. Racing around town to get ready for the holidays can leave you with time for little else but unless you are consistent in managing your finances you can easily drop your credit score significantly with late or missed payments.
Don’t Be a Sucker
With the multitude of holiday promotions, especially where finances are concerned, it can be easy to get talked into things like store credit cards and other financing opportunities. Unless you have planned and research the financial products you are being talked into, it is in the best interest of your credit scores to refuse all such offers no matter how good the deal appears to be. Too many applications for credit or financing can certainly lower your credit score and leave you with obligations you likely can not afford.