According to an article in the Los Angeles Times a few years ago, the busiest shopping day of the year is not Black Friday, (the day after Thanksgiving), but rather the Saturday before Christmas. That same article also claims that the busiest online shopping days take place on the Monday or Tuesday a week or two before Christmas week.

So, it stands to reason that a large number of us still have shopping to complete and many others are just starting to think about the process.

Whether you find yourself with just a few items remaining on your shopping list or if the list hasn’t even been started, it is important that you consider your credit score and credit history when you head out to shop. Here are five credit related items to keep in mind while checking off the people on your gift list:

1. Your Credit Card Utilization

One of the primary factors that goes into computing your consumer credit score is "Credit Utilization."

Credit utilization is simply a fraction. The amount of credit that you have available to you on credit cards is the bottom half (or denominator) of that fraction. The amount of credit that you have used is the top half (or the numerator) of that same fraction. 

For example, if you have $1,000.00 dollars’ worth of credit available to you and you charge $500.00 on the credit card or cards that you own, your resulting credit utilization rate is 500/1,000, or 50%. If you don't pay any portion of that 50% before that credit card account reports to the credit bureaus, your credit utilization rate will be computed by the credit bureaus at that 50% rate. That level of utilization will damage your potential score. Not as bad as 75% utilization or 100% utilization, but it will leave significant credit scoring "points" on the table.

If you want to help your score, it is best that you spend only at a level that will allow you to pay your credit card bill down to 30% (or less) before that card reports to the credit bureaus in January. (By the way, credit cards only report to the credit bureaus once a month. Call your card issuer to find out what day of the month that is.)

2. In Store Credit Card Offers

If you make a purchase at a national retail store like Target or Macy's during the holiday season, it is likely that you will be offered a discount on your purchase if you apply for and use that store's credit card when you checkout. The offer is typically something like a 10% or 20% discount on all purchases made on the day that you make the credit card application.

Offers like this can be very tempting. (That's why the stores make them!)

But, consider the following:

1. Research reveals that people tend to spend more money when they use credit cards instead of cash. The spending likely increases even more if you are given a "one day only", limited time discount. If the 10% discount only applies to purchases made that day, you are very likely going to spend more money on that trip to the store than you had initially planned to.

2. Interest rates on store cards are high, often in the range of twenty to twenty percent. Whether your credit score is 620 or 850, you will receive that same high interest rate on a store issued credit card. If you use the credit card to finance a big purchase, the cost associated with that high interest rate will quickly eliminate any savings you received if you don't pay the bill off in full upon its arrival.

3. When you apply for a store card, it will show up as a "hard" inquiry on your credit report. Although the hit to your credit score will not be massive, you could potentially lose five to eight  points from the score of the credit bureau that the inquiry is run from. If you are planning on applying for a mortgage or auto loan in the next few months, even those few points could make a difference to whether you qualify for financing.

If you find yourself unable to resist the urge to apply for and use a store card, it bears repeating: be sure to pay the statement balance in full and on time before that card reports to the credit bureaus in January. At the very least, pay the balance down to no more than 30% of the available balance.

3. 0% Interest Offers That Aren’t Really 0%

When you are ready to buy something in a store, or online, you might be tempted with an offer of 0% financing. Pay close attention to exactly what you are being offered. Not all 0% offers are the same.

Sometimes the offer will “waive” the interest during a certain, set promotional period of time (for example, "90 days").

Other times the offer does not waive the interest, but defers it for a certain time period, instead. If you fail to pay the balance in full during that defined time, the retailer may retroactively charge you interest for that full period. In that instance, you never received the benefit of 0% interest at all. You should only consider utilizing this type of offer if you can pay the balance in full during the defined period.

Before signing up for any of these sorts of offers, "READ THE AGREEMENT", make sure you understand whether the interest is being "waived" or "deferred." We realize that the print is tiny on those agreements, but it’s important that you read it carefully anyway!

4. If You Must Finance Gift Purchases, Plan Ahead

It’s not a great idea to  be going into debt to finance holiday purchases. However, if you have no other option other than to borrow money, you should plan carefully. Rather than accepting an offer at a store, you should shop in advance for a favorable credit card offer. ( A 0% interest credit card offer with waived interest may not be available to you, but try to get the best offer that you can.)

Once again, "READ THE AGREEMENT" on all card offers that you consider.  Make certain that you fully understand the interest rate that you will be paying on that card. 

5. Consider Giving Yourself the Gift of a Credit Restoration Expert in 2024

If your credit score is “subprime”, perhaps the best gift to give yourself is one of a credit restoration expert. You can attempt to fix damaged credit issues on your own, but the process can be difficult to manage. It will require your time, patience, diligence and perhaps some aptitude for understanding what the credit bureaus and collection agencies are required by law to do.

You can consult the internet or tick tock, but there is a lot of unreliable information out there. Listening to tick tock or instagram “advisors” could lead you to take actions that do more harm than good for your credit scores. 

Instead, you may want to consider giving yourself and your family the gift of the services of a professional, reputable credit restoration company to help you along the path to better credit.

Research the company that you are considering and ask them how the work of restoring your credit gets done, and who does it. Look for a company that employs credit experts who are educated about credit and who will provide you with personal service.

Happy Holidays! May your days be merry and bright! Keep the items discussed above in mind during the holiday season and give yourself the gift of a higher credit score. It’s a gift that will keep giving, throughout the year.

Have questions about any of the above credit scoring information? Write to the author at info@123pcc.com.