The Well

Michelle Summerfield | Personal Finance,Blog

How To Protect Your Credit Score (And Maybe Even Improve It) This Holiday Season!

December 6, 2018

The holidays are supposed to be a joyful time of year, filled with good times and happy memories. Unfortunately, it’s also one of the more difficult times to protect your credit score. When you’re staring down lots of holiday purchases and events, it’s easy to fall into the trap of signing up for store credit cards to get discounts, running up your balances by not sticking to your holiday budget, and making late payments thanks to a hefty dose of overindulging.

But it doesn’t have to be that way. You can come out the other side of the holidays less stressed and less worried about how you’ll pay those credit card bills. Here are a few strategies to protect your credit score this holiday season. 

How to protect your credit score this holiday season

1. Be mindful of where your money is going

You’re going to hate me, but this is where you need to dial down your guilty pleasures. During the holidays we’re tempted with all the things — the fancy holiday lattes, yummy chocolates, and holiday meals and treats. 

But here’s the thing, if you’re not mindful of where your money is going, you could be spending twice what you usually do.

When considering a purchase, take time to pause and rethink. Do you need it? Is it really going to break the holidays if you don’t have it? Are you overindulging because you’re stressed out?

2. Create a holiday spending limit

Create a holiday spending limit and stick to it. While it’s important to have budgets and spending plans throughout the year, it’s more important during the holidays when it’s easy to make extra purchases for events, parties, and travel you normally wouldn’t have. Understand that you’ll have additional expenses over the holidays and budget it in to avoid using credit to fill a gap or spend unnecessarily.

3. Watch your plastic usage 

Along these same lines, be wary of how much you’re putting on plastic cards. Your credit utilization (how much of your total available credit you’re using) makes up 30 percent of your credit score! Banks and lenders like to see this ratio below 30%. The bills in January come quickly and no one wants to start a new year off with a hefty bill.

4. Try not to take on any new plastic, either 

You’ve heard the sales pitch before: “sign up for our store credit card and get 10 percent off your purchase today!” It might seem like a deal at the time, but if you don’t pay the bill on time, you could be in for interest charges in the range of 19-30%. Yikes. That 10% off isn’t looking so great now, is it?

Another reason to steer clear of store credit cards is a potential drop in your credit score. Each new credit product you sign up for is considered a hard inquiry. If you sign up for several at one time, it’s a red flag to lenders that you may be close to bankruptcy and you’re seeking more and more new credit. Checking your credit score with Borrowell is a soft inquiry that won’t affect your credit score. 

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5. Have open and honest communication with family and friends

Set expectations with family and friends about what you’re willing to spend before you start shopping. The holidays come with more than just presents – there’s holiday parties, extra food, and larger electricity bills.

According to RCC’s Holiday shopping survey 2018, Canadians expect 19% of their anticipated holiday spending to go to food, alcohol, sweets and other holiday entertaining.

After losing my job in 2015, Christmas was the last thing on my mind. But family reached out to invite me for Christmas. The first thing I told them? I’m sorry, but I can’t afford to buy anyone Christmas gifts, I hope you understand. I made it clear that I couldn’t afford anything and didn’t expect gifts in return. I was just grateful to be surrounded by family.

Never be afraid to be open with family and friends and talk to them about your situation. You should never be guilted into buying gifts or be required to go into debt for the holidays.

6. Start planning for the next holiday season now

The best thing you can do to protect your credit score? Start preparing for the next holiday season as soon as this one is over! Once you have an idea of what you spent, create a holiday spending limit for the following year and then start saving for that amount now. It’s much easier to put $50 a month away throughout the year instead of having to scramble set aside money leading up to the holidays.

Open a savings account and start putting the money away today. When next Christmas comes, you’ll have a nice bundle of holiday cash saved (plus interest earned) to put towards the holidays. How’s that for zero holiday stress?

7. Check your credit for fraudulent activity

The holidays come with a whirlwind of swiping and tapping, but what you might not realize is that it’s prime time for thieves and criminals to steal your credit information. Fraud attempts increase by 30 percent during the holidays.

To avoid identity theft, account takeovers, or chargebacks on your credit card, be sure to check your credit report during the holidays for anything that you don’t recognize. 

The bottom line 

The holidays should be a joyful time of year, not full of stress about how you’ll pay the bills and protect your credit score. Make the holidays worry-free by having a budget, paying your bills on time, and saying no to extra credit that may damage your score. 

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About The Author

Michelle Summerfield is a professional blogger and the creative director of The Classy Simple Life, a lifestyle design blog aimed at the 40+ woman. The blog started in 2012 and developed into a professional blog in 2017. In addition to documenting her journey to a simpler life, she covers topics such as money management, health + wellness, beauty, solo travel and thoughts on being a creative entrepreneur. Her work has been featured in The Globe and Mail, Toronto Life, and the CBC. To learn more about Michelle, visit her website here.

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