With the holiday shopping season about to kick off, it’s important to understand your financial situation before heading to the stores so that you can create a sensible budget. By shopping smartly, you can take steps to make sure your credit score doesn’t suffer for the sake of the season. That way you can remain merry long after the holidays are over.
Know your Score
Your FICO score is the score lenders use most often to determine your creditworthiness. It is a number between 300 and 850 that basically represents the risk lenders incur in loaning you money or extending you credit. Your credit score determines what interest rates you might receive on loans and lines of credit. Higher scores usually mean lower interest rates that save you money. That’s why it’s important to know your score before making significant holiday purchases. Whether your score is high, low, or somewhere in between, knowing how your shopping habits impact your score can help you make wise financial decisions.
Shop Smart
There are a number of steps you can take while shopping this season to protect your credit score during the holiday rush. First, it’s a good idea to set boundaries. If your score is lower than you would like — or even if you want to maintain it — it’s important not to spend outside your means. A good rule of thumb is to try to keep your credit card balances well below 35% of your total credit limits. If you know it’s hard for you to resist buying just "one more thing," try paying with cash. That way, you’ll be more likely to stay within the budget you set. And, as appealing as it can be to save 15% on your holiday purchases, it’s best to avoid retail credit card offers. Opening too many lines of credit can negatively impact your credit score and could ultimately cost you more than you’d save.
Safeguard Your Identity
Becoming a victim of identity theft would not only take the cheer out of the festive season, it could also ruin your credit score. That’s why you need to take special precautions during this busy shopping time to safeguard your identity. It’s a good idea to only bring what you need with you on trips to the mall and make sure that your purse or wallet is safely secured at all times — in a bustling shopping center, your valuables could be stolen when you least expect it, without you even noticing! When making an in-store purchase, be sure the cashier returns your card, and put it away before leaving the store. With simple efforts to keep your head about you despite the holiday rush, you can help thwart the threat of identity theft.