6 Ways to Build Your Credit While Holiday Shopping


build your credit while holiday shopping
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With the holiday season quickly approaching, the excitement of gift shopping for our loved ones begins. However, along with the excitement comes the financial pressure of keeping our credit in good financial standing. Fortunately, it is possible to enjoy holiday shopping without causing too much financial stress. By considering these simple measures, you can find the perfect gifts for your friends and family and improve your financial health by building credit.

What makes up your credit score?

Recognizing the factors that make up your credit score can make a huge difference when shopping for gifts this year.

  • Payment history
  • Credit utilization
  • Length of your credit history
  • Credit mix
  • New credit

Each factor makes up a certain percentage of your score. Often, credit bureaus consider a score of more than 650 “fair,” a score more than 700 “good,” and a score more than 750 “excellent.” Take advantage of this knowledge and build your credit this holiday season by following these helpful tips.

1 – Spread your spending over multiple credit cards

Your credit utilization measures the amount of available credit that is in use. Typically, it is a healthy practice to keep your credit utilization under 30%. High credit utilization can lower your credit score, and it can be challenging to repay such a large amount. While shopping for gifts this season, spread your purchases among multiple credit cards to avoid utilizing more than 30% of your available credit on each card. If one of your credit cards is already above 30% utilization, avoid using that card to make purchases until after the holiday season, or spend wisely if you’re confident of having the funds to reduce the balance when the bill arrives in January.

2 – Increase your credit card limit

Receiving a credit limit increase can have a positive impact on your credit score, as well as provide you with more funds for holiday shopping. Your credit card issuer will provide you with a credit card limit increase if they have seen that you are a responsible cardholder. Credit card issuers like to see no late payments, no over-the-limit purchases, good credit health, and a substantial income to cover your bills and debt. A credit card limit increase gives you more flexibility and can give you the chance to improve your credit utilization. For example, if you have a $500 balance on a credit card with a $1000 credit limit, the credit utilization is 50%. A credit limit increase to $2000 will drop your credit utilization to 25% and potentially increase your credit score.

3 – Take control over your credit payments

As you begin to shop for gifts for your loved ones, keep in mind that your payment history weighs the heaviest on your credit, making up 35% of your credit score. Be cautious during this busy time that you do not neglect to make your payments on time. Creating reminders on your phone, setting up automatic payments to each card, or designating specific days to make card payments,  are all ways you can stay on top of your credit card payments and build your credit.

4 – Research credit card offers

Applying for new credit during the holiday season can make your holiday spending more manageable. Possessing multiple credit cards can negatively affect your credit score. However, if you only have one card, opening another credit card account could provide you with benefits that you may not have currently. Some credit cards offer credit reward programs and sign-on bonuses that can be great to use for gift shopping. When you apply for new credit, a lender performs a hard inquiry to view your creditworthiness, which leads to a slight temporary decrease in your credit score but can be overcome with regular on-time payments. Take some time to compare credit card offers carefully to find one that meets your needs.

5 – Open another loan account

A simple way for you to gain access to more funds for holiday shopping and boost your credit score at the same time is by opening a different line of credit, such as a personal loan. Taking out a low-interest personal loan can help build your credit because it diversifies your credit mix, which accounts for 10% of your credit score, reduces your credit utilization, and records positive payment history. As with opening a new credit card, be aware that a lender performs a hard inquiry of your credit every time you apply for a personal loan. Research different lenders and compare their offers on personal loans to decide which one works best for you.

6 – Monitor your credit report

All the excitement and rush that comes with holiday festivities may distract you from your surroundings. Opportunities for identity theft and credit card fraud increase around this time of the year. FinLocker makes it easy to monitor your financial transactions when you enroll all of your bank accounts. Once a year, you can order a free credit report from each credit bureau: Equifax, Experian, or TransUnion. FinLocker provides account holders with their TransUnion credit report year-round for free. A credit report can help you efficiently spot unfamiliar charges to any of your accounts and help you to recognize habits that are either building or hurting your credit.

As the season of giving approaches, the holiday shopping craze puts many of us at financial risk. Start practicing these financial tips while gift shopping can help you be financially prepared for the new year.

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