dad and daughter looking at tablet (Photo: bbernard/Shutterstock)

4 Ways to Protect Your Credit Score During the Holidays

By Meg C. Hall

While the holiday season is a time of joy and celebration, for many consumers it’s also a time of financial strain. According to Experian’s annual holiday survey, two out of three Americans feel stressed by the burden of extra expenses during the holidays.

"Debt you can't repay will certainly bring down one's holiday spirit,” said Rod Griffin, Experian director of consumer education and awareness. “There's often the temptation to overspend, but the best gift you can give yourself is being financially smart.”

Here are four ways Griffin said you can ensure some peace of mind about your credit score this holiday season.

Know where your credit stands

Protecting your credit score — during the holidays or at any time of year — starts with awareness. You don’t have to be a credit expert, but having a basic understanding of how credit works and monitoring your score will naturally support your financial health.

“Getting your own report does not hurt credit scores,” said Griffin. "Check your own report and know what’s in it. If people were to do that more often, they would be able to better own that process and control it.”

Before you start marking gifts off your shopping list, take time to evaluate your current financial situation and see if there are areas for improvement. Visit AnnualCreditReport.com to request your credit report so you can see for yourself where you’re doing well, and what you can work on to improve your credit score.

Create a holiday budget — and stick to it!

It's easy to overspend around the holidays. Creating a financial plan is critical. It's easy to overspend around the holidays. Creating a financial plan is critical. (Photo: rawiwano/Shutterstock)

Once you have an idea of where your credit stands, you can start planning for those special holiday purchases.

“Create a holiday budget and plan, and stick to it,” Griffin advised. “This can help you avoid overspending and will make sure your holiday cheer doesn’t disappear come January.”

Your utilization rate — the ratio of credit used to the amount available to you — is one of the top factors that go into your credit-score calculation, and taking on excessive debt can quickly cause your score to plummet.

“It’s easy to overspend, especially around the holidays,” he said. “Many people head into a new holiday season and they’re still working to pay down the debt they acquired the year before. Creating a financial plan and budget is a critical step to maintaining and improving your financial health in the new year.”

Use credit strategically

So should you ditch the credit cards this year and opt for a cash-only Christmas? Not necessarily, said Griffin. It all depends on your individual situation and personal discipline.

Paying with cash or debit cards can help ensure you stay within the holiday budget you have set for yourself, but some credit card promotions may help you get more bang for your buck.

“The key is strategic use of credit — whether that's using a card that provides low interest, rewards points or cash back — to improve the shopping experience and stretch your dollars," he said.

In fact, using credit responsibly during the holidays may actually help improve your credit score.

“Use credit as a financial tool,” Griffin advised. “It may make sense to open one or two new cards around the holidays to take advantage of retail discounts or other offers, but don’t overdo it. Any discounts you receive for opening a new account can quickly be negated by interest fees if you aren’t able to pay the bill in full right away.”

Be aware of scams

Be careful of websites that are irresponsible with your personal information. Be careful of websites that are irresponsible with your personal information. (Photo: Tero Vesalainen/Shutterstock)

The lure of a great deal can be especially difficult to resist during the holidays, which means consumers are at increased risk of fraud and scams at this time of the year — especially online.

“The popularity of online shopping makes consumers more susceptible to purchasing fraudulent goods or entering personal information into a website that is not secure,” Griffin explained. “Stick to what you know. Shop at reputable retailers and through secure websites you’re familiar with to avoid purchasing fraudulent products or having your information compromised.”

Before making a purchase or checking your bank accounts online, he said, be sure you have a secure internet connection and look for “https” in the URL, which indicates that the site is secure.

Regardless of how much you plan to spend this holiday season, or where you choose to shop, your biggest financial priority should be creating a budget and clear spending plan, said Griffin.

“Credit can be a financial tool, but debt is a financial problem. If you start the holiday season with a budget and plan in place, you can be prepared to use credit wisely during the holiday shopping season and avoid negative impacts to your credit score.”

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