How To Have A Debt Free Christmas

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Christmas is fast approaching - and you know what that means don't you?


It means that it is the most wonderful time of the year to spend money and of course, use credit cards. The time where people will spend their hard-earned money, savings, and credit to buy presents and other seasonal decors that only last within this season.


However, is it worth it? of course, it is worth it.


Would it still be worth it if you found out that you have lowered your credit score and have tons of debt knocking on your door for the new year?


We can still enjoy the Christmas season but let us not forget to be mindful of spending our money during this holiday.


Do you know that spending too much on holiday expenses can result in the Increased Utilization Percentage of your credit?


According to Shawn Lane, a consumer credit expert, Increased Utilization Percentage is calculated by dividing the current balance by the original credit balance. The IUP makes up 30% of the credit score and is the second biggest factor when it comes to credit scoring.

Shawn also stated that this means if you spend $1,500 on presents, and your credit card has a total limit of $5,000 and already carries a $500 balance. The card will now have a balance of $2000 and a 40% utilization ratio. Your credit score decreases as your utilization ratio exceeds 10%.

Aside from the Increased Utilization Percentage, holiday shopping can greatly affect your credit by opening or accepting extra discounts through the in-store credit cards offered by retailers.


Then, how can we avoid these credit headaches during holidays?


Well, here are some ways you can avoid this:

  • Provide and use a budget. Provide an allotted budget during the Christmas season. During these times, it is best if you know how to budget your Christmas expenses. You must also avoid buying unnecessary Christmas decors to stay within your allotted budget. In this way, you will be able to maintain your good credit and there will be fewer headaches after the season.


  • Find ways to have discounts. You can apply for special deals and coupon codes to a store instead of applying for store credit cards.


  • Schedule an extra payment on your credit card or pay your balance before the statement period ends. By doing this, you will be able to decrease the utilization of your card and you will be able to enjoy not just the Christmas season but also the new year, knowing you are not overextended.