The holidays are one of the busiest times of year for your family — and your credit score. With so much going on, you can easily make a mistake that tarnishes your record.
Some of the most common shopping habits can get you into trouble this season. But after all you’ve done to build your credit, you can’t let something like holiday shopping tank your credit. Check out this list to learn what you should avoid.
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1. Revolving Balances
The balance on your credit card or line of credit is important — and not just from a bill standpoint. It also relates to your credit score, as your balance affects your utilization ratio, a big factor in your score.
Your utilization ratio shows how much of your available limit you use. Having a high ratio means you use a lot of your limit, which doesn’t look good. Generally speaking, you should never carry more than 30% of your limit at any time.
Maxing out your account to splurge on gifts can take a sledgehammer to your score, so you’ll only want to charge what you can pay off in full.
Of course, there may be exceptions if you use a line of credit as a safety net. You might have to use 60% of your limit to afford an essential and unexpected repair to keep your house safe, even if you can’t afford to pay off your balance by the next due date.
In these emergencies, the online loan experts at MoneyKey recommend borrowers pay as much as they can with every billing statement. Use a budget to find more cash you can throw at your bills.
2. Late Payments
The size of your payments isn’t the only thing that matters. Timing is also another big factor of your score.
You never want to pay a bill late. Even just one late payment can reduce your score by 180 points, according to Credit.com. And chronic lateness will have an even greater impact on your score.
In emergencies, you can rely on a line of credit’s minimum payment. This minimum is enough to avoid a late payment in your record, although it isn’t an effective way to pay off debt.
If you don’t think you can even make the minimum, reach out to your creditor. They might be willing to work with you to find a more flexible payment option.
Before you get to that stage, try to avoid using credit when you know a minimum would be a challenge. Use your budget to identify your spending limits and find ways to cut expenses.
3. Fraud
Sharing your personal information with the wrong person is another bad habit to avoid. Unfortunately, it can be hard to tell the difference between right and wrong at this time of year. In the hustle and bustle of looking for gifts, you can find yourself on a fake website.
If you don’t notice the warning signs, you can share your financial details at checkout. While you wait for an item that will never arrive, the owners of the fake site will use your personal information to impersonate you and open cash advances.
Their bad behavior can cause your score to plummet, so it’s important you brush up on your cybersecurity skills. If you think you have become a victim of fraud, report it to the following organizations:
- The account that made the purchase exposing your details.
- The major credit reporting bureaus.
- The Federal Trade Commission.
Habits can be hard to break. So don’t ever make them. Shop safely and always pay off your bills on time. These tips can help you protect your score all season long.
