Holiday Spending Can Hurt Credit Scores | Car Loan Pal

Written by Brady    Thursday, November 19 2009

Tis the season -- for spending on Black Friday bargains. As each year passes, consumers continue to feed into the Black Friday frenzy. Stores will open well before the sun comes up offering bargains that are too good to let go. Buyer beware, do not let your Black Friday spending spree bring down you credit score, ultimately hurting your credit score for larger purchases such as a car or home.

Below are the Top Five Holiday Credit Traps - ways consumers fall into bad credit situations during holiday shopping.

1. Applying for multiple credit lines - Inquiries are placed on a credit profile each time someone applies for a credit card, this can lower a credit score if there are too many. Many of the places offering amazing bargains on everything from toasters to plasma TVs also offer credit cards to help consumers pay for the many items they wish to purchase. This can be a trap for those not prepared with a proper budget for their purchase.

2. Excessive spending that increases debt to available credit ratio - A debt to available credit ratio that is too high will lower a credit score and decrease the ability to get a loan.

3. Spending more than can be paid back - There are so many deals starting the day after Thanksgiving that consumers find it difficult to pass up. The debt racks up but one's ability to pay back the debt in a timely fashion most likely does not improve. This is a quick way to start getting behind on payments or missing them completely, which will hurt credit scores.

4. Exceeding holiday budgets - Typically holiday gift budgets are based on what you intend to spend on family and friends. Most people do not include their excess personal spending. There are bargains everywhere on wishlist items and the "cannot pass this up" mentality kicks in. The temptations to buy items that were not planned ahead of time is way to high. Before you know it, the holiday budget has been exceeded by double, triple, or even more of the original plan. The money has to come from somewhere and this can put a heavy strain on bills such as car loans, mortgage, heating, etc.

5. Forgetting to pay bills - The holiday season is the busiest for many people. Work, gatherings, school, shopping, etc. all make for a busier time and decrease the attention given to simple but important activities such as paying bills. Missing payments is a big mistake regarding credit scores. This process is compounded by opening new charge accounts that you are not in the habit of paying yet. Be sure to keep track of all your holiday spending and that you are able to make the necessary payment to keep your credit score healthy.

Keeping these points in mind during holiday shopping will certainly help keep your credit situation in good standing. Remember, the biggest purchases you will normally make, a home and car, rely heavily on your credit scores. Do not let smaller purchases such as holiday gifts impact the ability to get a mortgage or car loan and force your payment to e higher because of an unfavorable interest rate.