‘Tis the season to stop assuming your finances (and credit score) have to take a hit during the holidays. You have complete control over your scores and, with a little planning, can protect and rebuild your credit during this most wonderful time of the year.
1. Only charge what you can pay off every month.
When you’re trying to rebuild your credit, the last thing you need is a bunch of holiday debt following you into the New Year. It not only costs you in interest payments, but also raises your credit utilization ratio, which isn’t good for your credit score. The higher the balance you carry, the more likely you’ll only be able to afford minimum monthly payments or, worse, get into the habit of making your monthly payments late. Take a long, hard look at your budget for November and December. How much money is coming in to cover the cost of holiday spending on your credit cards? Once you’ve done the math, limit your holiday credit card spending to whatever cash you’ll have on hand to pay back what you’ve charged every month.
2. Apply for a secured credit card to use for holiday spending.
If you don’t have a credit card, apply for one that you secure with a cash deposit. Just make sure to shop around for the best deal possible, including a card issuer that reports your activity to the credit bureaus. This reporting can help your credit score and the card can help you stick to your budget.
3. Cash spending only.
If you don’t have a credit card, don’t want one, or don’t trust yourself to use it responsibly, limit yourself to a cash-only approach for this year’s holiday purchases. The less you spend, the more creative you’ll have to get, but what you’ll probably find is that the less you spend on gifts, the more they mean to you and the recipients. You don’t have to get fancy to make some magical holiday memories, it’s the thought that counts.
4. Skip the traveling, pay down debt.
If you’re always visiting long-distance family for the holidays, think about mixing it up instead this year. Do the math and see just how much you’ll save by staying home instead. It may add up thousands of dollars that you could put toward outstanding credit card debt. Yes, it’s a tough call, but one that has the potential to make a huge impact on your financial life going into the New Year. Instead, you can get creative with a virtual family holiday gathering. All the perks of family-time, none of the cleanup.