The holiday season may spark joy, but it can also spark the urge to spend, spend, spend. And what if the holidays approach while you’re in the middle of trying to boost your credit score?
Don’t despair — you can still work on your credit score while cultivating a happy holiday. While you’re on your quest for better credit, check out these five tips. You’ll be well on your way to boosting your score as you do your holiday shopping.
1. Develop a Holiday Shopping Budget
Budgeting isn’t always fun, but it does save you from yourself when it comes to holiday overspending. Before you give yourself the chance to overspend, look at your usual budget. Determine how much room you have for holiday spending and whether you can make adjustments to reserve funds for gifts.
Next, identify how much you’d like to spend for different groups of your friends and family members. For example, you may be willing to spend $50 for your parents and $30 each for your siblings. With your friends, you may draw one of their names to streamline spending. You can even set a small budget of $10 per person in your group to keep things reasonable.
If your budget is smaller, be transparent and upfront about it with your gift-giving peers. Your friends and family want to help make the holidays fun, not stressful. By being honest about your budget, you can keep the season bright. There are many ways to stretch your budget — consider a handmade or food-related gift, all of which are appreciated. Get creative and work within your real-life budget so you can balance giving gifts with your financial goals.
2. Start Shopping Now
You may have already heard that there are supply chain delays this season. Do your best to start shopping for gifts for your favorite people now so you can avoid shortages. If you wait, you may have to resort to paying a premium on otherwise reasonably priced gifts. Shop now, and you’ll have the best chance to get a deal on what you want.
A bonus of shopping now is that you can start building up a history of on-time payments. As you buy, the transactions you make will show up on your credit card purchase history. Once your purchase clears, consider making a payment to your card balance throughout the weeks leading to your gift-giving occasion.
If you don’t yet have a card, consider adding a secured credit card to your wallet this holiday season. These cards are secured by your spending account, which you can use to pay down your balance. According to Chime, this inflow of on-time payments from a secured credit card results in everyday purchases being reported to credit bureaus. And since on-time payment history is responsible for 35% of your credit score, making your payments on time is incredibly impactful for your score.
3. Leverage Cash Back and Rebate Opportunities
While a rebate does not give you carte blanche to blow your budget, it can help you enhance your spending power. Use shop-through sites like Rakuten or plugins like Honey to get the most bang for your buck. These sites allow you to get upwards of 10%-15% cash back just for purchasing on their site. You can also use discount coupon codes on top of your shop-through purchase, increasing your savings power.
This strategy can help you gain more spending power. But before you click the buy button, be sure that you can make your credit card payment without it. Most rebates are not awarded until upwards of 90 days past the purchase date. Pay for your purchase as you usually would by paying on time and in full each month. Use the rebate or cash-back offer to pay down future purchases or to restore your savings account.
4. Use Your Cards’ Existing Rewards Programs
You may have an attractive rebate waiting for you through one of the cards already in your wallet. Many credit card providers award points for certain retailers like Amazon and Target. Log on to your account to see if you have an unused bank of points you can use on holiday gifts.
Using your points for gifts can help you to reduce your overall expenses. With less money spent on gifts, you can work on other financial goals. Consider paying down your card balances, shoring up your savings account, or donating to a worthy cause. Using rewards can help you accomplish both your shopping and your savings goals.
5. Choose What Card to Use Wisely
Part of your credit score is determined by your credit utilization. If you have a card with a lower limit, you could exceed a healthy utilization rate of 30% or lower. If you spend $200 on a card that has a $500 limit, you’ll be using 40% of your available credit.
Keep your utilization rate in check by spreading the love across your cards. Pay down your balance as you buy to keep your utilization rate low. Aim to keep the running balance on any of your credit cards below 30%. This way, you’ll have the best data reported to the credit bureaus.
Have a Happy Holiday, Not a Holiday Headache
The holidays are a time of joy. Keep the reason you celebrate at the top of your mind as you consider buying gifts for your friends and family. It’s always fun to spoil your favorite people with gifts. Remember that your loved ones wouldn’t want you to go into debt or damage your credit for a gift-giving obligation.
Focus on thoughtful and meaningful gifts as you do your shopping. Stay on budget and make real-time payments on your cards as you purchase items for your favorite people. Your focused action now can result in good credit-reporting habits in the early months of 2024. You’ll head into the new year after a fulfilling holiday season with a credit boost and a happy heart.
