Christmas can easily become the most expensive time of the year. If you’re not careful, it can also end up hurting your credit. Here’s a list of some mistakes to avoid:
Shopping Online at Unsecured Websites
When shopping online, it’s best to stick to big-name retailers or companies and stores you know and trust. Without a secure site, it has become easy for hackers to gain access to your payment information. It’s important to only provide this information on secure sites. Even with nationally known retailers, anytime you use your credit card for a holiday purchase, double check that the URL address of the website starts with “https” and not just “http.” The letter “s” lets you know it’s a secure site.
Missing a Payment
We all want some extra cash during the holidays, but whatever you do, don’t borrow that extra cash from your credit card payment budget. Late payments are one of the worst credit mistakes you can make. Missing a single payment on a credit card can drop your credit score by up to 100 points. Never exceed your holiday budget to the extent that you are unable to pay your bills on time. Use your credit cards responsibly and make payments on time.
Opening a ton of store cards
It’s enticing to get 10% or 15% off for opening a new card while Christmas shopping, but opening a bunch of store credit cards is still a bad idea. A new credit card will show up as an inquiry on your credit report. Every time you apply for credit, no matter how small, an inquiry shows up and your score takes a small hit. Each inquiry can temporarily drop your credit score by five or ten points.
Charging up a low-limit credit card
Did you know that the closer your balance is to your credit limit, the lower your credit scores will be? For example, if you charge $1,000 on a card with a $1,500 limit, that appears much worse than putting the same amount on a card with a $10,000 limit. Even though the amount you’re spending and the total amount of credit you have available hasn’t changed, being over that recommended maximum of 30% can cause a decline in your credit score. It’s even more important to remember that if you plan on paying off your holiday purchases over several months, this harmfully high ratio on the card will continue to show on credit reports.
Taking out a Payday Loan
Even if it seems like a great plan to get some extra holiday cash by obtaining a Payday Loan, think again. These loans are highly controversial because of their impossibly high interest rates. Payday loans could harm your chances of becoming a homeowner. Many banks and lenders believe regular use of payday loans may suggest you are either financially stretched or unable to manage your finances.
Spending your savings
Refrain from spending your savings! If you dip into your savings in an effort to create a larger holiday spending budget, you’re setting yourself up for some financial disappointment down the road. Save yourself some stress and make a holiday budget that doesn’t involve using your savings. Make it a habit each year to put money into a Christmas savings months before December. RentPlus Money is a great place to plan and prepare ahead of time.
Avoiding these mistakes will help set you up for a more financially successful year in 2022. Also, be sure to sign up for RentPlus and build your credit simply by paying your rent on time.