For many Americans, budgets are getting tighter, and the upcoming holiday season may feel overwhelming. In times of financial uncertainty, putting all of your holiday purchases on credit cards may be tempting. However, this could put your credit score at risk, especially if your holiday shopping leaves you unable to cover your minimum payments.
Along with overspending, identity theft is another risk that could jeopardize your credit this holiday season. Online shopping could put you at greater risk of identity theft. At Atlas Credit, we know protecting your credit score during the holidays is essential. This is why we've compiled tips to help you this holiday season.
7 Tips to Protect Your Credit Score During the Holidays
There are various ways you can protect your credit during the holidays this year. Follow the tips below to maintain your credit while holiday shopping:
1. Monitor Your Credit Score
First, check your credit score before you start your holiday shopping. You can find your credit score on a personal finance website or via your credit card provider. You may also be able to check your credit score via your bank's mobile app. When you know your starting point, you can identify if your credit score rises or falls during the holiday season by regularly monitoring your score.
Beyond the number, review the explanation behind your score. A number of factors can affect your score, such as your credit utilization ratio and your history of on-time payments. By monitoring your score, you can determine what to avoid doing that could negatively impact your score and where you stand if you'd like to apply for credit this holiday season. If you notice a sudden drop in your score, this may be a red flag that someone is applying for credit and using accounts under your name.
2. Avoid Spending More on Your Credit Card Than You Have
A simple way to avoid overspending on your credit card is by using your credit like cash or a debit card. This means you don't spend more than you currently have in your checking account. Though it can be tempting to use a credit card to cover costs you can't afford, this can quickly lead to a balance you struggle to pay off. Many credit cards come with high interest rates, which can make paying off your balance even more challenging.
Your loved ones don't want you buried in credit card debt due to holiday spending, so be sure to monitor your funds and only spend what you can truly afford when you do your holiday shopping.
3. Set a Spending Limit
When you spend too much during the holidays, you could end up with a credit card balance you can't pay off in a lump sum. A higher balance means your credit utilization rate is higher, which can hurt your score. Carrying a balance from month to month can also mean you quickly rack up interest.
One of the best ways to keep your spending under control and protect your credit score during the holiday season is to set a spending limit and create a budget that includes holiday spending. A budget is a financial plan, and simply by planning how much you will spend during the holidays, you can avoid overspending.
4. Watch Your Credit Limits
Your credit utilization refers to how much of your credit limit you're using — the lower your credit utilization, the better. The rule is to maintain a credit utilization rate under 30%. For example, if you have a credit limit of $1,000, you should keep your credit card spending under $300 each month.
If your credit card provider offers account alerts, sign up for them to help you track your credit utilization. Additionally, you may want to request an increase to your credit limit. By increasing your credit limit, you can lower your utilization rate without decreasing your spending.
5. Think Before Applying for Retailer-Specific Credit
During the holiday season, retailers tend to offer discounts to shoppers who open store credit cards at checkout. Know that applying for new credit may decrease your score. An application for new credit can trigger a hard inquiry, which can ding your credit in the short term.
If you're approved for the store credit card, your new account may lower your credit's average age. A store credit card with a low limit can also hurt your credit utilization, so before you apply, make sure the offer is worthwhile.
Rather than applying for a store credit card right at checkout, do your research ahead of time. Determine whether the offer is worth the ding to your credit score, such as a significant discount on a major purchase.
6. Pay Down Your Debt
Before the holiday season arrives, aim to pay down your current debt, especially if you're carrying this debt over from last year's holiday season. By paying off your current credit card balances, you can free up your credit before you leverage it for this year's holiday spending.
Follow the tips below to pay down your debt:
- Utilize bonuses.
- Enroll in autopay.
- Start a side hustle.
- Consolidate your debt.
- Build an emergency fund.
- Cut discretionary spending.
- Pay more than the minimum.
- Negotiate lower monthly bills.
- Use the debt avalanche or snowball method.
7. Beware of Identity Theft
While you should focus on enjoying the holiday season and shopping, beware of identity theft. Thieves and hackers tend to target shoppers around the holidays in identity theft schemes.
Avoid using your debit card PIN whenever possible. When you do need to enter your information, shield the keypad. Carefully watch your purse or wallet and monitor your credit card statements to make sure every charge is one you made. For additional protection, you may want to sign up for identity theft monitoring through your credit card provider.
Get a Personal Loan From Atlas Credit to Cover Holiday Purchases
With a great credit score, you can get better rates on loans, housing, insurance, credit cards, and even cell phone plans. This is why it's so important to watch your credit during the holidays to avoid drops in your score and uncover identity theft. By getting a personal loan, you can both cover your holiday purchases and help build your credit. You may be eligible for a personal loan if you're a legal adult, have a steady job, and can repay the amount you borrow.
Atlas Credit one of the most responsible and reputable consumer lenders in Texas, Oklahoma, and Virginia. We opened our doors in 1968, and our customers are still our most valuable resource. We treat each customer with respect and honesty to deliver top-tier customer service. If you want a personal loan to cover your holiday purchases, our staff is ready to help.
Apply for a personal loan from us at Atlas Credit to cover your costs this holiday shopping season.