Understanding Credit During the Holiday Spending Season

As the holiday season approaches, expenses can start to increase, with travel costs, gifts for friends and family, and donations. A common way to manage these costs can be to use credit to handle all the expenses, and it’s important to understand the impact of credit and how to minimize its long-term impact. 

Risks to Credit Scores 

Often, using credit for holiday expenses can increase credit utilization, or how much of your available credit has been used. Keeping your utilization high beyond a month or so can cause your credit score to dip, even temporarily. Additionally, it’s easier to miss or make late payments during the holidays, even if you didn’t spend more than usual. One late payment can have the largest single impact on your credit score, so make sure you set reminders and make payments on time. 

Quick Fixes to Credit Scores 

Even if your credit score drops during the holidays, it’s not impossible to bring it back up. Paying down the balance on your cards, getting payments back on track, or even making extra payments can help reset your credit and adjust your score. While it can be somewhat stressful, getting things back in order usually leads to improved credit scores within 1-3 months. 

Using Credit Wisely During the Holidays 

First, be sure you know the current state of your credit utilization and credit limit before you start your holiday shopping. This should be considered as a part of your holiday budget, as your credit utilization can limit your ability to spend. Next, you can lean into the rewards and perks of your cards, either through using points to save money or through discounts granted to your card. Finally, always monitor your account to ensure that you don’t pay extra interest, or go beyond your limits.