It may be hard to believe that summer and fall have come and gone, and the season of gingerbread, turkey, snowmen, and shopping is now upon us. If the previous months in 2020 have been any kind of indication, this holiday season is sure to be a whirlwind and, without proper precautions, could take our credit and wallets by storm. So, string up the lights, and let’s get to work protecting our credit from the holiday festivities coming our way.
Understand the true meaning of good credit
Good credit is the gift that keeps on giving well beyond the holiday season. Alright, so maybe it’s not an actual gift, but you should treasure it as if it were. Your credit score can help you secure better insurance rates, loans, and new credit cards. This means it’s critically important when it comes to buying the big-ticket items in life (some of which might even be on your Christmas list this year).
Even though you may be tempted to throw caution to the wind and give in to your holiday whims, knowing what’s at stake and working to protect your credit by following the tips below is a gift you will value for years to come.
PRO TIP: Before venturing out (or online) to begin shopping, check your credit score and understand your credit limits. You can request a free credit report through annualcreditreport.com to see where your credit stands.
Now that we have had a refresher on the importance of good credit, let’s discuss how to go about protecting and building credit during the holiday season.
1. Check your budget twice
Just like good old St. Nick makes a list and checks it twice, we should follow suit by creating and checking a holiday budget. In addition to your usual monthly budget, this financial plan should account for additional costs that arise this time of year, things like higher electric bills from lights, gifts, food, and other items.
Here are three ways budgeting can have a positive impact on your credit:
- Helping you avoid high balances
- Making sure you only spend what you can afford
- Helping you focus on your overarching financial goals like paying off debt or building an emergency fund
Check out these easy tips for making and keeping a holiday budget.
2. Avoid the naughty list by paying your bills on time
Although it can be easy to get wrapped up in the joy of the season as you move from decorating and baking to shopping and volunteering, don’t let payment dates pass you by. Missing a payment or paying late can have a significant impact on your credit score.
Did you know that your payment history accounts for 35% of your overall credit score? That’s right, this is the biggest factor in determining your credit standing and thus should be a priority each month.
Automate your bills to ensure you stay on top of your monthly payments while you cozy up with your holiday traditions. Most recurring bills such as utilities, mortgages, car loans, etc. have an option for autopay so you can schedule your payments to come out of your account automatically each month.
For bills that don’t allow automation, set bill-paying reminders on your monthly calendar, or use a bill reminder app.
3. Accept your inner Scrooge and say no to retail credit cards
While you’re purchasing gifts on your list, don’t be swayed by the jolly cashier promising instant discounts and perks for signing up for the store’s retail credit card. Although it can seem like the deal of a lifetime at the moment, these cards usually come with high-interest rates and encourage further spending (an excuse none of us need).
However, if you are in the market for a new credit card, be sure to do your research. There are a lot of cards out there, and each option comes with benefits and drawbacks. Finding a card that will not only fits your holiday shopping needs but more importantly aligns with your overall financial and yearly goals is a must!
4. ‘Tis the season to be wary of identity theft
Throughout the year, scammers are lurking and waiting for the opportune time to steal your identity and access your hard-earned money. There is no better time to pounce than during the holidays when people are spending more and watching their statements less.
Don’t let the grinch (or scammers) steal your Christmas this year — take extra precautions and safeguard your finances. Here are a few simple ways to protect your identity while purchasing gifts for your friends and loved ones:
- Only shop on secure websites
- Use credit cards NOT debit cards when shopping online
- Update your passwords and make them unique and secure
- Monitor your credit and identity and sign up for a credit monitoring service
PRO TIP: If you think that your identity has been stolen, you must act quickly. The FTC’s Identity Theft website lays out the steps you need to take to place a fraud alert, report identity theft, and start to repair the damage.
Now that you have been thoroughly briefed and are well equipped to financially navigate the season ahead, pull out the decorations, make your grocery list, and let the festivities commence!