With the holiday season in full swing, it’s normal to get caught up in searching for the right holiday gifts, planning parties, sending greeting cards and opening your home to family and friends.
But if you wish to keep your credit health in check during this period, it’s wise to pay special attention to your credit report and credit scores. But do credit scores get updated on holidays? Well, here’s what you need to know.
Do Credit Scores Update During the Holidays?
The three major credit bureaus often update credit scores at least once a month or every 45 days, even during the holidays. The scores get calculated by running credit reports through a credit score model like FICO®.
Generally, credit bureaus update your credit reports when lenders provide them with new information, including your loan and credit activity. Once your credit report is updated, your credit score reflects the provided information.
While credit reporting agencies might not be open to the public during holidays, their computer systems run seven days a week. So, if a creditor sends a report, expect the bureaus’ systems to recalculate and update your credit scores.
That’s true, especially if you have multiple financial products.
But remember that the information received might not change your scores immediately. Therefore, don’t expect your credit score to jump suddenly when you make a single payment towards a pending card balance during the holidays.
Another thing, creditors may not report to the three major credit bureaus. Some may report to only one and others to two. Nonetheless, your score does refresh when they report data to the other agencies.
5 Tips for Maintaining Your Credit Score During the Holidays
While buying gifts for special people on your list and stocking up on decorations can put you in a cheery mood, they can wreak havoc on your credit scores.
During the holiday season, it is easy to miss payments and go over your limit, no matter how disciplined you are with your purchases. These small mistakes can lower your credit scores and negatively impact how you get loans in the future.
Luckily, we’ve provided a few tips below to help maintain your credit during the holidays. Check them out!
1. Don’t Open New Credit Card Accounts
While opening store credit accounts to save money this holiday season is tempting, your credit might suffer. Whether you open a single account or multiple, the credit card issuers can run a hard inquiry on your credit report to confirm your creditworthiness. If that happens, your credit score is negatively impacted.
Even though the effect can be temporary, your score can still take a hit. Furthermore, too many hard inquiries within a short period can appear like you’re seeking credit cards and loans that you might not be able to pay back.
So, no matter how enticing the holiday discount might appear, try to resist the temptation of opening new retail cards. Keep in mind that the impact of opening multiple new accounts increases if you don’t have a long credit history or other credit accounts. For instance, the new card can lower your average credit account age, negatively impacting your scores.
A new account can also raise your credit utilization ratio if you immediately use the card to make large purchases.
2. Avoid Maxing Out Credit Cards
Hitting your credit card limit to cover holiday shopping can negatively affect your credit score, increase your minimum payments and lead to a decline in future transactions. Remember, the amount owed on credit card accounts is one of the main factors determining your credit scores.
Your credit score can drop if you max out your credit cards without acting fast to lower your balance. Hitting credit limits increases your credit utilization ratio, one-factor creditors use to determine your credit risk when deciding whether to give you a loan.
According to financial experts, you should use at most 25% of your available credit limit or keep your credit utilization below the 30% mark to maintain a good credit score. If you must max out your credit card, pay down your outstanding balance and stay up to date with payments.
Besides that, hitting credit limits might cause higher minimum payments, which is hard to handle. That holds true particularly if you struggle to cover the previous minimum payment.
The best way to avoid hitting credit card limits is to create a budget for this holiday and stick to it. But remember to include unexpected expenses in your budget.
3. Don’t Take New Loans to Cover Holiday Spending
It might seem like a good idea to take a personal loan to pay for a holiday rather than depending on credit cards. However, this might not be your best move because personal loans don’t always offer the best interest, especially if you have a poor credit score. Moreover, you can only spend what’s borrowed and clear the loan within the stipulated time frame.
Personal loans tend to come with fees and penalties, which drive up the cost of borrowing. Some lenders might even charge you for paying the balance off before the end of your loan term.
And let’s not forget its effect on your credit scores. While timely payments of the loans can help your credit, late or missed payments can negatively impact your credit scores.
Holidays are a time to enjoy yourself and rest, but if you take out a personal loan, you may constantly worry about how you will pay it back. So, naturally, this may make your holidays more stressful.
But you can avoid all this by looking into other ways to fund your Christmas. For example, you can sell unused items, use your credit card points or get a loan from a friend or family member.
4. Make Timely Payments
Amid the holiday distractions, you might need to remember to pay your bills or credit card balances for a few days. Unfortunately, this can seriously affect your credit score, considering it depends on your payment history.
Your repayment history accounts for 35% of your score. Although late or missed payments might negatively impact your score, they can take you beneath the creditor’s cut-off points for loan approval. As a result, you might not qualify for credit.
Sometimes, credit card companies can turn to debt collection agencies if credit card balances go unpaid for months. Once your account is in collections, you might no longer enjoy minimum monthly payments. As a matter of fact, the agency might demand full payment.
And if the missed payment leads to default or a judgment, the negative effect on your credit scores can be more drastic. Fortunately, you can help avoid this by setting up automatic bill payments via your credit card provider or bank. This can help you pay your bills on time each month.
Alternatively, you can pay more than the minimum to clear your debt faster and incur less interest.
5. Shop Securely In-store and Online
As much as you love hunting for the best deals during holidays, take the necessary steps to protect yourself from fraud. Don’t shop at unknown or unsecured websites.
Also, avoid suspicious websites and online shops that ask for your personal information. If cybercriminals get this information, they can use it to open new accounts in your name and take loans, which can cause havoc on your credit scores.
While you can dispute the fraudulent charges, the process often takes a while.
If shopping in-store, keep your wallet close because thieves can strike. Also, use your credit card instead of cash or debit card because you can have more protection when it comes to reporting of fraudulent activities.
Some credit cards even have additional benefits like warranties, which is a plus.
Sign Up for A Credit Monitoring Service This Holiday Season
The best way to maintain and protect your credit this holiday season is to check your credit report. By doing so, you can help identify signs of fraud or identify theft and take steps to mitigate them before your credit score falls into turmoil.
You also receive credit monitoring to help track changes in your borrowing behavior and stay up to state on your credit scores.
That said, MyScoreIQ services offer you real-time credit monitoring and keeps close tabs on your credit report. If the service notices possible suspicious activity, you receive alerts, so you can take steps to help protect your personal information.