The best part of the holidays is watching the joy on the faces of the people we love when we are able to give them the perfect gift. Finding just the right thing to make that happen can take thought, time, and money. No other time of the year requires quite as much spending so it is important to keep in mind your credit score while holiday shopping to avoid post holiday disaster.
How to Find Your Score
This three digit number is essentially how your financial situation and responsibility will be assessed universally. To keep control of your credit score while holiday shopping it helps to know what it is. There are a number of ways to get your score, some of which will require payment, others are free.
The most widely used is your FICO score which you can obtain from http://www.myfico.com/. It will cost $19.95 unless you sign up for a free trial of their Score Watch Program. Alternately there are three credit report bureaus that will have a score that is not your exact FICO score but will be close enough for most people to manage their debt. The bureaus are Equifax, Experian and TransUnion. Using websites such as creditkarma.com or creditsesame.com you can get your scores from these three companies for free along with other excellent financial information.
You’ve got your score and its 700 or higher, a great number, this leaves you free to shop with abandon right? Wrong! It’s important now to protect your credit score while holiday shopping. Here’s how:
- Pull together your credit card statements
- Find your payment due date and make note of it for each card. This will be the date your minimum payment will be due to the credit lender.
- Locate your statement closing date for each card and note that as well. This is the date your bill is calculated for the following month and this is where confusion can set in for some people. The credit card company will add up any spending you have done since the last billing cycle, any existing balance, subtract payments made and credits to find your balance due. Because the report is filed on the closing date with the credit bureaus you never have a zero balance as long as you are paying on the due date. If you want a zero balance you need to pay the total due and not use the card for an entire billing period.
Safeguard Your Credit Score While Holiday Shopping
There is another way to have your spending never reported and have no negative impact on your score. Paying off the balance you will owe before your statement closing date means there will be a zero balance at close and that is what will be reported, none of your purchases will ever show up on the report so gifts you purchase will not affect your credit score while holiday shopping.
Two caveats to this method are:
- If you get your math wrong you could end up with a small payment owed at your due date. You will have to make a second payment to stay current.
- You will lose your grace period if you pay before the closing date but if you spend carefully and continue to pay on or ahead of time this will not be a problem.
Get Your Score Back On Track after the Holidays
What if you hurt your credit score while holiday shopping or maybe you aren’t starting with the best score? There are some methods to help you get your score back on track.
Highest APR First Method
Rank your current cards from the highest interest rate to the lowest. Make minimum payments due on all but the highest APR card. Make overpayments on that card until it is completely paid off then move to the next highest interest card and so on.
Double or triple the minimum payment due if you can but choose how much you are going to be able to pay and keep the payment the same until the card is paid off, do not decrease the payments to reflect the new minimum due each month.
Lowest Balance Card
This works along the same principle as the first method only instead you pay off the card with the lowest balance first and when that is paid off you move up to the card with the next lowest balance. You can get one card paid off faster which will help boost your belief that you can be debt free.
Turn all of your payments into one by moving your debt to a single, low interest rate card. You can stop juggling payments and even set that single payment up to be automatically withdrawn from your bank account so you are certain you will never miss it. Set the monthly payment amount as far over the minimum balance due as possible.