Your credit score probably isn’t at the top of your list of things to worry about during the hustle and bustle of the holiday season. After all, you have gifts to buy, parties to plan, greeting cards to send and maybe even vacations to finance. That’s until you take a look at your bills and realize there is no way you are walking away with an undamaged credit score.
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A lower score can mean higher interest rates, difficulty getting approved for loans, and long-term financial stress. To keep your finances strong, here are six smart ways to protect your credit score during the holidays while still enjoying the festivities.
1. Avoid Opening New Credit Card Accounts
During the holidays, clerks might pressure you to open a store credit card account. “It’s a great way to get a discount,” you’ll likely be told. It can be tempting too, especially if you are aiming for cheap holidays this year. But while you might save a little money initially, your credit score can take a hit.
Opening a credit card — or several at once — will result in hard inquiries that appear on your credit report. These inquiries can lower your credit score. The dip might be temporary, depending on other factors, but it’s a dip nonetheless.
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2. Don’t Max Out
Maxing out credit cards to cover holiday gifts will undoubtedly hurt your credit score. The amount you owe on credit accounts is among the biggest factors impacting your credit score.
If you’re using a high percentage of your available credit — that is, if you’re close to maxing out credit cards — your score will drop. To avoid this debt spiral, try creating a budget and monitoring spending as you shop.
3. Resist the Urge To Take Out a Loan
Getting a personal loan to cover holiday spending can possibly be a smarter move than relying on credit cards, but that doesn’t make it a good move. The interest rate might be lower and it will be fixed. In addition, you can’t spend more than you have borrowed, and you have a clear end date for repayment.
However, you will still be taking on a new line of credit and adding to your overall debt. If you have to take on debt to fund holiday shopping, it might be a sign you can’t afford it. Instead, you might need to trim your Christmas gift list, or let friends and family know you need to opt out of giving gifts this year. Creating your own handmade gifts is another way to reduce holiday spending.
4. Make Payments on Time
It is fun to buy holiday gifts, but remember, those expenditures need to be paid off. Holiday distractions can cause you to forget to make payments on time. It’s easy to overlook a credit card statement sandwiched between all of the other mail arriving at this time of year. Or, you might miss an electronic statement in an inbox full of holiday-sales alerts from retailers.
Your payment history is the biggest factor in determining your credit score. It accounts for 35% of the score, and failing to make payments on time can negatively impact it. To avoid making late payments during the holidays, set up automatic bill pay through your credit card issuer or bank.
Make sure you pay at least the minimum amount that is due. Ideally, you should pay more than that, though. That way, you reduce debt faster and pay less in interest.
5. Watch Out for Holiday-Related Scams
Consumers can put their credit score and identity at risk by giving out personal information such as their name, birth date and Social Security number to get special offers. Fraudsters often take advantage of consumers by sending phishing emails, hoping to bait you into taking action.
For example, criminals might send you emails that appear to be from retailers offering great deals if you click on a link that takes you to a phony site. The fake site will then collect your personal information as you enter it. Another variation on this scam is an email that appears to be from a charitable organization asking for a holiday donation. Stay cautious.
6. Monitor Your Credit Report
Checking your credit report is the best way to find mistakes that can lower your credit score. You might also find other signs of fraud. Make sure to check your financial accounts and monitor your credit report and credit score throughout the holiday season.
The three credit bureaus — Experian, Equifax and TransUnion — allow you to check your credit report for free at Annualcreditreport.com. You can pay a small fee to get your credit score from each of the bureaus or from GoFreeCredit.com. Additionally, many credit cards include sending credit alerts as a perk for free.
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: 6 Ways To Protect Your Credit Score During Holiday Shopping Time
