Holiday spending can ding your credit score. Protect yourself by knowing your score and what affects it, guarding against scams and shopping strategically.

The rules for protecting credit during the holidays usually don’t vary much from year to year, but in 2020, COVID-19 has changed where and how we shop. And money’s tight for a lot of people. About 40% of Americans said they plan to spend less on holidays this year due to the pandemic, according to a recent NerdWallet survey.

On the other hand, some may be tempted to overspend if mortgage forbearance, loan deferrals or credit card concessions have helped them build savings. But if holiday purchases leave shoppers unable to cover even minimum payments when those other bills resume, their credit will be badly damaged, says Jeff Richardson, senior vice president for marketing and communications at VantageScore, a credit scoring company.

Whether you’re being more generous or watching every penny, chances are you’re shopping online. Tom Quinn, vice president of FICO Scores, a credit scoring and data company, warns that consumers may be at higher risk of identity theft this year. It’s all too easy to go for deals we hope are real or fall victim to increasingly sophisticated phishing messages.

Here’s how experts recommend guarding your credit.

Check your credit score

Many credit cards and personal finance websites offer free credit scores, Quinn says. Choose one that offers a clear explainer of why your score is what it is. Understanding the factors that hold you back — for example, too many cards with high balances — can help you make spending decisions.

How to do it: Pick a source you like and stick with it. Free scores vary in the credit bureau data and scoring model used.

And look ahead, Richardson suggests. If you’re planning to shop for a car or home loan next year, start thinking about your credit health now, he says.

Track how much of your credit limits you use

One of the things that matter most to your score is how much of your credit limits you’re using. That’s called "credit utilization," and it’s best to stay under 30%. If you can, aiming even lower is better.

How to do it: Many credit cards offer account alerts to help you keep track. Sign up for those, and use your free credit score source to track credit utilization as well.

When you make a list, set a spending limit

According to NerdWallet’s holiday shopping survey, about a third of those who used credit cards to buy gifts were still paying for the 2019 holidays when surveyed in September 2020. Adding to existing balances means higher credit utilization, which can hurt credit scores. Richardson cautions against taking out a loan to "make room" on cards for holiday spending.

How to do it: Find gift ideas that will bring joy without costing much — purchases made using credit card points, framed original art from your child, sharing skills you have. The internet is full of good suggestions. And if money’s tight all around; a suggestion to skip exchanging gifts this year could be welcome.

Think twice about applying for retailer-specific credit

Retailers may offer a discount if you open a credit card with them at checkout. But applying for new credit can ding your score in a few ways. You could lose a few points when the application triggers a credit check called a "hard inquiry." If you’re approved, a new account will lower the average age of your credit. And cards tied to a specific retailer can hurt your credit utilization because they often have low limits. So make sure it’s worth it.

Quinn says a credit card tied to a specific retailer can be a good idea if it offers a meaningful discount on a big purchase. "That can be enticing," he says. Beverly Anderson, president of Global Consumer Solutions at the credit bureau Equifax, says a card at a retailer where you frequently shop may also get you early access to sales.

How to do it: Plan ahead; don’t decide at checkout. That gives you time to investigate your odds of being approved. You don’t want to potentially lose credit score points for applying only to be denied. If you’re approved, make a plan to avoid carrying a balance because paying interest will cut into your savings.

Be skeptical, and freeze your credit

Being suspicious can keep you from becoming a victim of identity theft or fraud. Consumers may get phone calls, texts or emails requesting personal data from scammers pretending to be card issuers or retailers. Quinn says when he got a recent email with a subject line "re: your recent Amazon purchase," his first instinct was to try to recall what he had bought. Then, he looked closer and noticed the sender’s email address wasn't the official address for the company.

How to do it: Be leery of any communication that asks for sensitive data, such as a card or account number. Don’t click on attachments. If you think a message may be legit, independently verify contact information and initiate a call or email yourself.

Check statements carefully for purchases you didn’t make and report them to your card issuer promptly.

Freeze your credit. It’s free and you can do it by phone or online at the three major credit bureaus: Equifax, Experian and TransUnion. You can still use your credit cards, but criminals should be unable to use your personal data to open an account. Unfreezing is easy when you want to apply for credit.

Don’t let up after the holidays

When holiday bills start to arrive, pay at least the minimum on time. A payment that’s 30 days or more past due can devastate your credit score and linger on your credit report for seven years.

Consider setting up autopay to cover at least the minimum payment, Anderson says. That ensures you don’t overlook a bill, and you can always make an additional payment to wipe out more than the minimum.

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