Shopping is synonym with the holiday season. It is not surprising that retailers offer credit card pitches during Christmas holidays and you could be tempted by any lucrative offer. In reality, these savings could make a big difference in your budget. However, it is important to check your credit scores before applying for a new loan this holiday season, because doing so could damage your credit more.
High Credit Card Balances
During the holiday months of November and December, you are more likely to spend lavishly compared to most other months. Spending during these months is fine as long as you saved for the increase in spending or adjusted your budget accordingly, keeping in mind your credit card bill payments.
• You may want to distribute your expenses across different billing periods.
• You may choose to pay your balance multiple times within a bill cycle to ensure your credit balance remains low.
• You may like to choose different credit cards for your specific expenses, because your credit utilization is calculated from individual cards while also taking into consideration your overall credit limits and balances.
Experts recommend keeping your credit balance at 30% below your credit limit. The lower the credit balance, the better!
Going Into Debt
Of course, who does not want to splurge during the holidays? It is that time of the year when everyone wants to indulge in shopping, which is more likely to drive up your credit card balances. But you do not want to go into debt merely by overspending on your credit card limit.
Ever-growing credit card balances may gradually become a big problem. You do not want it to get to the point where it becomes harder for you to afford making the minimum credit card payment. This will result in a negative payment history, which is no better than high credit utilization.
The best thing is to plan your spending and avoid overspending to avoid getting into debt during the holidays. Remember, getting rid of credit debt can be a big burden and take longer to pay off.
Also, do not forget that when you apply for new credit, lenders will check your credit report, resulting in a hard inquiry on your report. Applying for new credit cards will negatively affect your credit balance. Avoid applying for too many credit cards to keep your credit history clean.