The credit score possesses enormous important for consumers. After all, it is the most often-used measurement of a person’s creditworthiness, which is whether they can be trusted to honor their outstanding debt obligations or not. As a result, having a higher credit score can help interested individuals get access to a wider range of financial products under better conditions than otherwise possible. Considering how much use most people make of financial products, this means that a higher credit score can help them out in a surprising range of ways. Under these circumstances, consumers should do their best to improve their credit score during the holidays, which can be a serious challenge.
How Can You Improve Your Credit Score During the Holidays?
First and foremost, improving a credit score starts with understanding how a credit score is calculated. Generally speaking, when someone says something about a credit score, chances are good that they are referring to the FICO score rather than one of the other credit scores that can be found out there. The exact method used to calculate the FICO score is unknown, but FICO has released plenty of information about the factors that matter to them, which should provide interested individuals with more than enough insight to get started.
The two most important factors in the calculation of a FICO score are a person’s payment history and a person’s credit utilization. Payment history refers to the records of their past interactions with financial products, which are the single best indication of whether they can be counted upon to make their payments on time or not. After all, if someone shows a consistent pattern of making their payments on time, it seems probable that they will be able to do the same in the future as well.
In contrast, if someone’s own transactions show that they struggle to do so, that is cause for lenders and other businesses to be cautious of taking them on as a customer. As for credit utilization, that is a somewhat neat-sounding way of saying what percentage of someone’s available credit that they have taken out as actual debt. This matters for the simple reason that more debt means more strain on the finances, which in turn, means a higher chance that they will become unable to make their payments on time.
Besides these two factors, there are three more factors that can be considered the length of history, the mix of credit, and the number of new inquiries. These matter because a longer history means more information that can be used to make a more accurate prediction, a more varied mix of credit shows a greater mastery of financial products, and a greater number of recent inquiries for the credit report suggests that the person is rushing to take out as many financial products as possible within a short period of time. Something that should never be seen as a positive sign.
Based on these factors, it should be clear how someone can improve their credit score during the holidays. First, they should make the payments on their credit cards and other financial products on time. Second, they should make sure that their outstanding balances are as low as possible. Ideally, they should be paying off their outstanding balances for their credit cards as soon as they have accrued them so as to minimize their interest charges, but considering the sheer amount of spending that happens during the holidays, that might be a bit too difficult. So instead, interested individuals should do their best to minimize the amount of debt that they accrue with their holiday shopping.
Sometimes, this means saving up in the months leading up to the holidays so that the saved-up cash can be used to make the purchases. Other times, this means cutting back on expenditures, which is something that can happen in various ways. Common suggestions range from planning out purchases and choosing less expensive options to buying fewer presents and throwing less lavish celebrations, but there are more possibilities that can be found out there on the Internet for those who are interested. On top of these suggestions, people should also avoid opening up too many new financial products all of a sudden, which could have serious consequences for their credit score as well as their willingness to spend.
On a final note, people should also keep a close eye on their credit reports during the holidays because of the sheer number of transactions that will be happening. This way, they can correct possible errors made by the companies that report transactions, which can have a beneficial effect for their credit scores. Better still, they can act on suspicious transactions sooner rather than later, which could enable them to minimize the damage done to their finances in case someone manages to steal their personal information. Simply put, vigilance can help interested individuals a great deal when it comes to maintaining a good credit score.