With holidays fast approaching, it is now the time of year when spending tends to rise. From gifts to travel to candles and decorations, it can be an expensive thing to get in the Christmas spirit. Not shockingly, many people end up in debt during the celebration of the season.
Not only can holiday debt be expensive, but it can also drag down your credit score. It’s not a good thing to go into the new year. Here’s why.
1. You can fight to get a mortgage
Buying a home should be one of the momentous events of your life. However, if your credit score gets a hit due to holiday expenses, it may be difficult for you to be approved for a mortgage in 2022. This may mean that you miss out on a chance to lock in an affordable mortgage rate.
2. You may have difficulty renting a home
Even if you do not borrow a large sum of money when you sign a lease to rent a home, you still promise to pay your landlord every month. If your credit score is not good, a landlord may see you as a risk and worry that you are not getting your monthly payments on time. It can prove to be problematic if you have to move sometime next year.
3. You can get stuck with an expensive car loan
If you are considering buying a new car next year, then the last thing you want is a hit on your credit score. Although it is possible to get a car loan when your credit is bad, you can, if that is the case, expect to be charged a higher interest rate to borrow money. The result? More expensive monthly payments that could really force you to limit your spending elsewhere.
4. You might be missing out on some great credit card deals
You never know when a good credit card deal might hit your radar. If your credit score falls below a favorable range, you may not be eligible for the cards that give the most money back, airline miles or bonus points.
5. You do not need stress
Seeing your credit score take a dive can give you a world of stress. You can lose sleep by worrying about your credit score hit, and that alone is not worth it if that hit can be avoided.
How to avoid credit score damage
It is in your best interest to keep your credit score in good shape into the new year. To do this, you need to adhere to a few basic rules during your vacation expenses:
- Set a budget before you start shopping so you do not go overboard.
- Do not spend more on your credit cards than you can afford to pay off at the time your bills fall due.
A little attention on your part can prevent your credit score from dropping by the end of the year. And that, in turn, could pave the way for a much more economically healthy 2022.