We all want to have a good time over Christmas and the New Year but spending over the festive period can soon add up. And whilst you are on holiday, it’s important to remember that your credit score is not. It’s still busy going up and down depending on how you are managing your credit.
Keep in mind that your credit score drops:
- If you miss payments
- As the number of accounts you have increases
- The level of your debt increases
This can have consequences for your future that you may not have considered. Lenders see you as higher risk and will start to charge you more, from your mobile phone contracts and insurance premiums, to higher interest rates on mortgages and other loans.
Hitting your credit score over Christmas can therefore make it harder to achieve your goals for the New Year. Buying a new home perhaps or starting up a new business.
Be sure to follow these money management tips to keep your credit score healthy while you enjoy the festivities.
2021 will thank you.
Watch out for overspending
It can be really easy to overspend at Christmas, especially if you haven’t created a budget. If you have to use a credit card or loan to get you through Christmas, make sure you only spend what you can afford to repay.
The best way to avoid overspending is to create a budget. Pen and paper is a good start. Better still, fire up a spreadsheet. To help you out, Stag Protect have a budget planner that you can use, free of charge.
If you’ve tried to create a budget before with the more traditional methods and it hasn’t worked for you, think about using an app like MoneyDashboard or Yolt.
Be aware of how you use credit
For a lot of people, spreading the cost of Christmas can make sense, especially if you have access to low interest or 0% credit. But be careful. It’s easy to use credit in ways that unintentionally damage your credit score. So make sure you:
- Know your credit limits and don’t spend more than you have access to. Lenders will think you are struggling with your debt if you spend beyond your credit limits.
- Don’t accidentally go overdrawn unless you have an arranged overdraft facility with your bank.
- Try not to use too much of your available credit limit. If you can, keep your borrowing within 50% of the available credit. If you are constantly at the top of your limit banks will wonder if you can really afford it, especially if life throws you a lemon.
Don’t miss monthly payments
Missing payments or paying late can have a real impact on your credit score, not to mention your back pocket. According to Clear Score, if you miss a payment as a one off it shouldn’t be too much of a problem, but if it happens more than once, it could affect your credit score. And don’t forget, the lender will likely charge you fees and penalties for missed payments, making next month even tighter.
The easiest way to avoid this is to setup a direct debit for the minimum repayment so that you pay your bill automatically. It’s also a good idea to pay more than the minimum charge if you can.
Be careful of store credit
Big high street retailers will be vying for your business, as they do every year. They often entice you with store credit to get access to discounts and to spread the cost. Store cards can be a great way of saving money if you use them effectively, but remember, they are still credit.
Even if you are after the discount, be mindful of how many store cards you’re applying for, especially in a short time frame. Every time you apply for a store card, you credit score will be referenced. If you apply for multiple cards, it might look like you are struggling for money.
And don’t forget the shops offer you credit to help them, not to help you: they can more easily track and advertise to you, they tie you in to coming back to their shop when there could be other cheaper stores and they often receive a fee from the credit company.
If you do use a store card as part of your Christmas spending, be sure to setup a direct debit to pay the monthly bill.
Can I go and enjoy myself now?
Yes!
If you follow these tips, your Christmas festivities will have less of an impact on your credit score.
Go grab a mince pie and enjoy.
