7 min read

How to protect your credit score at Christmas

Andre Spiteri
30 November 2017

5 top tips to help you enjoy the festive season, without the financial hangover

Keeping up good spending habits at Christmas isn’t easy. Seasonal expenses add up and can leave your finances somewhat worse for wear. Sadly, your credit score doesn’t go on holiday, and if you’re not careful, your festive cheer can have consequences in the new year.

But don’t worry - with our tips, you can make the most of Christmas and keep a healthy credit score, without turning into Scrooge.

TIP 1: Beware of the risks of overspending

The cardinal rule with credit is to only spend what you can afford to repay. But at Christmas time it’s quite easy for spending to get out of hand, especially if you set off without a budget.

So before you start spending, it’s worth drawing up a Christmas budget. If paper lists and spreadsheets haven’t worked for you in the past, it could be worth trying an app. OnTrees, MoneyDashboard, Squirrel, Pennies and Wally are all free to download.

TIP 2: Keep an eye on how you use your credit

Using credit to spread the cost of Christmas can make sense - especially if you're able to get a 0% interest credit card. However if you’re not careful with how you use it, you can inadvertently use your credit in a way that can harm your score. Here are 3 ways you can avoid accidentally damaging your score over Christmas:

  • Make sure you know your credit limit before you start spending. Going over an agreed credit limit can be really harmful for your score, as it suggests to lenders you're not coping with your current debt. It can be pricey too, with most lenders charging fees and interest if you go over your limit.

  • Even though most of us might not think it, overdrafts on your current account count as credit. If you accidentally go overdrawn on your account without having a planned overdraft, you'll get hit with fees and charges, and it can potentially damage your score. If you think there’s a chance you’ll need an overdraft, make sure this is authorised by your bank first.

  • Lenders look at the total credit available to you, and how much of it you're using (known as your credit utilisation). If you use too much of your total limit, it can count against your score. Equifax suggest using no more than 50% - so if you have £4,000 total credit limit across 3 credit cards, try not to use more than £2,000 across the 3.

TIP 3: Make everything automatic

It’s easy to miss payments when you’re busy worrying about what to get your cousin for Christmas or rushing from one party to another. This is especially the case if you’ve taken out a new form of credit in the lead up to the holidays.

But missing payments, or paying late, can be costly to both your score and your wallet. If you miss a single payment as a one-off, it shouldn't cause too many problems, but if you do this more than once it could be quite damaging to your score. Late fees and penalties often come along with missing payments too, so it can make your existing debts build up quite quickly.

For this reason, it’s a good idea to pay as many of your bills as you can by direct debit. This means the money will be collected automatically, so you’ll never miss a due date.

Pro Tip
To keep on top of your regular bills (e.g. rent, council tax, utilities and phone) you could consider opening a separate bank account. If you add up the total monthly cost, you can set up a standing order from your main bank account for the full amount. That way, you won’t have to worry about your account going overdrawn or not having enough cash to cover your bills. (BONUS TIP: Current accounts such as Santander 123 even pay cashback on some direct debits).

Keep track of your finances for free on ClearSore

TIP 4: Store credit is still credit

Christmas is one of the most expensive times of the year. Many retailers try to take advantage of this by offering special deals on store credit - either in the form of a credit card, or by spreading the cost of a purchase over several months.

On the one hand, this can be attractive, and even worthwhile. For example, you could get an interest-free period or money off your purchases. However, store credit is still credit, even though it may not feel like it because you’re not using a traditional lender.

Store credit can involve a credit check, which will leave a mark on your credit report. For this reason, you should avoid applying for a lot of it in a short space of time. Doing so can make you look like you’re having financial problems, even if you’re just after a discount.

As is the case with your bills and other forms of credit, missed payments can attract late charges and show up on your credit report. So, make sure you always pay everything on time and in full. Here again, it’s a good idea to arrange payment by direct debit, so you can set it and forget it.

TIP 5: Watch out for online scams

While they’re a problem all year round, online scams tend to become more common around Christmas time. Aside from losing money, scammers could use your personal details to make false credit applications or buy financial products. These could appear on your credit report and damage your score. (One of the first signs of financial fraud is someone carrying out a credit search in your name. You can see your history of searches in the 'Searches' section of your ClearScore account.)

If you plan to do your Christmas shopping online, it’s best to stick with websites you know and trust. It’s also worth being extra vigilant with your email. Red flags include:

  • Emails supposedly from big brands that have poor grammar and spelling
  • Odd requests, such as asking for your PIN number
  • Strange website addresses, for example amazon.net.uk instead of amazon.co.uk

And finally - time to relax and enjoy

If you follow these simple tips, you’ll be well on your way to keeping your finances, and your credit score, in good shape this Christmas. So, with that out of the way, it’s time for the most important part. Kick back, have some eggnog and make the most of your time with family and friends.

It is, after all, the season to be jolly. Right?

by Andre Spiteri

Andre is a former lawyer turned financial writer. Andre has written this article especially for ClearScore.

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