3 Ways to Protect Your Credit Score During the Holidays 

With the recent Equifax data breach that affected 143 million consumers, protecting our credit scores has risen in importance in our minds again-and it should. As you probably already know, your credit score determines whether or not you can qualify for loans and how much borrowing that money will cost you. These days it also affects your rates for car insurance, whether or not you can easily sign up for a new cell phone plan, and even if you’ll have to slap down a chunky cash deposit when switching on new utilities.

As we get close to the holidays, it’s easy to start swiping credit cards online or at the department stores without realizing how much it can affect our credit scores. For most people, holidays mean spending money outside of the usual budget for family entertainment and meals, airline tickets, and gifts.

Exactly how the major credit bureaus calculate your credit scores is a matter of high math. Many of the factors aren’t easy to understand, but there are a few of them that we know for sure-and with some care, you can sail through the holidays without any negative hits.

Important Day-to-Day Credit Score Factors:

• Payment history. On-time payments are key. Your payment history accounts for 35% of your score in most models.
• Amount owed. Your entire indebtedness accounts for 30% of your credit score.
• Mix of credit. A high number of revolving accounts (credit cards, department store lines, etc.) with balances over thirty percent of the available credit is another critical factor.

The list goes on, but with these in mind, here are three ways you can protect your good scores during these times when out of the ordinary spending is something most of us do.

1). Be careful about running up credit cards. 
This probably sounds like something your grandfather would tell you, but it’s true. If you have to use revolving credit, it’s wise to spread out your purchases over a few different card accounts to keep the balances under 30% – 50% of your available balance.

2). Avoid unnecessary credit inquiries. 
You will get a lot of offers for discounts or zero-percent financing if you “just sign up for this card now” during the holidays. That’s one way retailers entice you into making purchases that you would otherwise avoid or consider very carefully. If you really need to make a purchase on credit, go ahead and apply, but remember that inquiries on your report can have a temporary negative effect to the tune of 10 – 20 points in some cases. This isn’t a long term problem if you don’t apply for credit frequently, but being aware of this impact will help you protect your score.

3). Have a plan to pay down balances. 
The plain truth is that many of us will use credit during the holidays. We may even exceed the optimal percentage of available credit. Here’s the thing: have a plan to get those balances down as quickly as possible. Since your credit profile is re-assessed every 30 days, you can bring scores back up quickly if you plan ahead for paying these accounts down after a period of using the credit. It takes a little discipline and forethought. Do you have a bonus or tax refund coming up soon? Are you getting extra overtime or taking on side work? There are ways to handle this intelligently and enjoy high quality gift giving experiences with your loved ones-without jeopardizing your valuable credit resources.

I have touched on just a few of the overall factors that affect your credit in this article. There are many other things to consider in addition to those I’ve mentioned. If you are planning to start shopping for a new home, or refinance your existing loan in the next few months, it’s a good idea to make sure that your credit score is as good as possible.

Do you have questions about where you stand and how to make excellent choices about using credit? I will make myself available to consult with you and come up with a plan that works.

In the meantime, I wish you a joyful holiday season that’s filled with warmth and good times.