Deck the Halls and Build Your Credit: Holiday Spending Tips

When the holiday season rolls around, many of us find ourselves in a spending frenzy, swiping our credit cards for gifts, decorations, and everything else that makes this time of year magical. However, with all the Black Friday deals and festive shopping sprees, it's easy to lose track of your finances and fall into debt. But the good news is the holiday season also offers a great chance to build credit and improve your credit score. Intrigued? Let's explore how to make holiday shopping benefit you financially.

What is Credit Building?

Credit building is the process of improving your credit score by showing responsible credit habits. It involves managing your credit accounts wisely, paying off debts on time, and keeping your credit utilization low. During the holiday season, when spending is at its peak, credit building becomes not only possible but also highly beneficial.

Your credit score is a number that shows how trustworthy—or creditworthy—you are as a borrower. Creditors use it to assess the risk of lending you money. A higher credit score indicates that you are a reliable borrower, which can lead to better loan terms, interest rates, and other financial advantages.

The best way to build credit during the holidays is to use your credit cards wisely. Understand your credit score, set realistic financial goals, and keep track of your spending. This way, you can enjoy the festivities without putting your finances at risk.

How to Build Credit While Holiday Shopping

Looking to make the most of your holiday shopping and boost your credit at the same time? Here are a few easy strategies to help improve your credit score while taking advantage of seasonal deals.

1. Know Your Credit Limit

Before you start your holiday shopping, take a moment to understand your credit limit. Each credit card has a specific limit, which is the maximum amount you can charge on that card. Going above this limit can negatively impact your credit score.

Also, staying within the credit limit helps you avoid extra fees and reduces the risk of overspending. This practice not only protects your credit score but also gives you better control over your finances.

2. Create a Budget to Pay Off Your Card Debt

Creating a budget before you start shopping can save you from a post-holiday financial headache. By setting spending limits and sticking to them, you make sure you are only buying what you can afford, which reflects positively on your credit report.

In addition, a budget helps you track your expenses so you don't overspend and end up with debt you can’t manage. It also allows you to prioritize necessary purchases instead of impulse buys. When your bill is due at the end of the month, you will be prepared to pay it off in full, avoiding interest charges and keeping a positive payment history.

3. Pay Often to Keep Your Credit Utilization Down

Paying off your credit card balance more frequently than usual during the holiday season can be a game changer. By making multiple payments throughout the month, you are keeping your credit utilization low. This matters because low credit utilization is one of the best ways to build credit.

Aim to keep your utilization below 30% of your total credit limit. For instance, if your limit is $1,000, try to keep your balance under $300. By paying down your balance before it gets too high, you maintain a healthy credit utilization ratio.

4. Use Multiple Credit Cards If You Have Them

If you have multiple credit cards, consider using them strategically during your holiday shopping. Spreading your purchases across different cards helps keep your credit utilization ratio low on each card. Plus, managing multiple cards shows lenders that you're capable of handling credit, which is a positive mark on your credit report.

Having multiple cards also lets you take advantage of different rewards programs and offers. For instance, one card might give you cashback on groceries, while another offers discounts on travel. By using your cards wisely, you can make the most of these benefits while building credit.

However, if you don’t have multiple credit cards yet, avoid applying for several new cards at once. This can lead to "hard inquiries" on your credit report, which might lower your credit score.

5. Keep An Eye on Your Credit Report to Prevent Identity Theft

Monitoring your credit report during the holiday season is one of the best things you can do. As you make more purchases, the risk of identity theft and fraud goes up. Regularly checking your credit report helps you catch any suspicious activity early so you can address it quickly.

You can get your credit report for free from the major credit bureaus once a year. We suggest ordering one report from a different agency every four months, allowing you to monitor your credit year-round for free. Check your report for any errors or unfamiliar accounts that might suggest fraud. If you find anything unusual, report it right away to protect your credit score!

Best Way to Build Credit at Academy Bank

Holiday shopping doesn't have to be a source of financial stress. With some planning and smart credit management, you can turn this season into a great opportunity to build your credit.

At Academy Bank, we're dedicated to helping you build credit effectively and responsibly. Our Credit Builder Secured Credit Card is a fantastic tool for this, especially during the holiday shopping season.

How does it work? The Credit Builder Card requires a deposit that serves as your credit limit. There are no application or annual fees, making it an affordable way to start building your credit. By using this card for your purchases and making on-time payments, you'll be on your way to a better credit score.

And the best part? Our card automatically reports your positive credit behavior to the three major credit bureaus. With consistent and responsible use, you could even graduate to an unsecured card.

Let's build your credit this holiday season!

Want more tips for managing your holiday spending? Find out how setting up a dedicated account can keep your holiday budget on track, and see how a personal loan can help you spread some extra cheer.