With the holiday shopping season now upon us, the potential for damaging one's credit â€“- either via over-spending or being the victim of identity theft â€“- is high.
With the holiday shopping season now upon us, Americans are preparing to swipe and type their debit and credit card information into thousands of retailers’ computer systems.
That means the potential for damaging one’s credit — either via over-spending or being the victim of identity theft – is high.
The personal finance firm Credit Sesame says there are a handful of ways consumers can protect themselves this holiday season. One of the best ways is also the most basic — set a budget.
“Many consumers approach the shopping season without a budget or spending plan, which can wreak havoc on your personal finances,” said John Ulzheimer, a credit expert at the firm. “It’s important to stay conscious of your budget and how your spending will affect your credit in the year to come.”
With that in mind, the company suggests 5 tips for protecting your credit this year:
1. Avoid Opening New Retail Store Cards
Credit Sesame notes that many store cards have low credit limits and high interest rates, both factors that can ding your credit score, even if you only borrow just a little.
2. Use Credit Over Debit and Cash
That’s because consumers can’t be held liable for unauthorized charges on a credit card, but could face liability — or at least headaches – for unauthorized charges on a debit card. Likewise, lost or stolen cash is more than likely gone forever.
3. Don’t Spend More Than Can Be Paid in Full… By January
It may be tough love, but Credit Sesame says a good rule of thumb is to make a goal of paying off your card within a month of the December holidays. If you’re worried you’re spending more than you can pay off in January, perhaps it’s time to reassess your planned use of credit.
4. Check Credit Reports Before Dec. 31
As Credit Sesame notes, “One cannot improve their credit score without first knowing what’s on their credit report.” The beginning of a new year is a good time to pull your own credit score. Credit Sesame, among other services, allows you to check your credit report and get your credit score for free.
5. Use the Credit Card with the Highest Limit for Shopping
Credit limit ratio — the measure of how much you’re borrowing versus the size of your credit limit – is a big factor in determining your credit score. Using the highest-limit card enables you to keep that ratio in relatively healthy shape.