The rules for protecting credit while on vacation don’t usually vary much from year to year, but in 2020 COVID-19 has changed where and how we shop. And money is tight for a lot of people. About 40% of Americans said they plan to spend less on vacation this year due to the pandemic, according to a recent TBEN 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 shopping leaves buyers unable to cover even minimum payments when those other bills pick up, their credit will be badly damaged, says Jeff Richardson, senior vice president of marketing and communications at VantageScore, a credit rating company. credit.
Whether you’re more generous or looking at every penny, there’s a good chance you are shopping online. Tom Quinn, vice president of FICO Scores, a credit rating and data company, warns consumers may be at higher risk of identity theft this year. It is too easy to do what we hope is real business or fall victim to increasingly sophisticated phishing messages.
Here’s how experts recommend protecting your credit.
Check your credit score
Many credit card and personal finance websites offer free credit scores, Quinn says. Pick one that clearly explains 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: Pick a source you like and stick to it. Free scores vary depending on the credit bureau data and the scoring model used.
And look ahead, suggests Richardson. If you’re planning to buy a car or a home loan next year, start thinking about your credit health now, he says.
Track how much of your credit limits you’re using
One of the things that matters most to your score is how much of your credit limits you use. This is called “use of credit” and it is best to stay less than 30%. If you can, it’s best to aim even lower.
How to do: Many credit cards offer account alerts to help you keep track. Sign up for these and use your free credit score source to track credit usage as well.
When making a list, set a spending limit
According to TBEN’s survey of vacation shopping, about a third of those who used credit cards to purchase gifts were still paying for the 2019 vacation in the September 2020 survey. Adding to existing balances means a higher use of credit, which can adversely affect credit scores. Richardson cautions against borrowing to “make room” on the cards for vacation spending.
How to do: Find gift ideas that will bring joy without costing a lot of money – purchases made with credit card points, your child’s original framed artwork, sharing your skills. The internet is full of good suggestions. What if money is tight all around; a suggestion not to exchange gifts this year might be welcome.
Think twice before applying for specific retail credit
Retailers may offer a discount if you open a credit card with them at checkout. But applying for new credit can date your score in several ways. You may lose a few points when the application triggers a credit check called a “deep investigation”. If you are approved, a new account will lower your average credit age. And cards tied to a specific retailer can hurt your credit usage because they often have low limits. So make sure it’s worth it.
Quinn says that a credit card linked to a specific retailer can be a good idea if it offers a significant discount on a large purchase. “It can be attractive,” he says. Beverly Anderson, president of Global Consumer Solutions at Equifax credit bureau, says a card at a retailer where you shop frequently can also give you early access to sales.
How to do: Plan ahead; do not decide at checkout. This gives you time to investigate your chances of being approved. You don’t want to potentially lose credit points by applying just to be turned down. If you are approved, make a plan to avoid having a balance, as paying interest will reduce your savings.
Be skeptical and freeze your credit
Being suspicious can prevent you from becoming a victim of identity theft or fraud. Consumers may receive phone calls, texts, or emails asking for personal data from fraudsters posing as card issuers or retailers. Quinn says that when he received a recent email with a subject line “re: your recent Amazon purchase,” his first instinct was to try to remember what he bought. Then he took a closer look and noticed that the sender’s email address was not the official company address.
How to do: Be wary of any communication that requests sensitive data, such as a card or account number. Do not click on attachments. If you think a message may be legitimate, independently verify the contact information and initiate a call or email yourself.
Carefully review the statements for purchases you haven’t made and report them promptly to your card issuer.
Freeze your credit. It’s free, and you can do it over the phone or online at the three major credit bureaus: Equifax, Experian, and TransUnion. You can still use your credit cards, but criminals shouldn’t be able to use your personal details to open an account. Thawing is easy when you want to apply for credit.
Don’t let go after the holidays
When vacation bills start rolling in, pay at least the minimum on time. A payment that is 30 days or more past due can devastate your credit score and stay on your credit report for seven years.
Consider implementing automatic payment to at least cover the minimum payment, Anderson says. This ensures that you don’t overlook an invoice and can always make an additional payment to clear more than the minimum.