It’s that time of year again: festival season, which brings both joy and the possibility of overspending. In the midst of the festivities, it is critical to be mindful of your spending habits in order to avoid post-celebration financial blues. So, here are some easy ways to keep your credit score from dropping this time of year.
Understand the budget
Make a budget for holiday spending that includes specific categories such as gifts, decorations, food, and entertainment.
Based on your financial resources, assign a reasonable amount to each category. Breaking down your budget into detailed segments allows you to better track your expenses and ensures that you allocate funds wisely throughout the holiday season.
Plan and prioritize your expenses
It is always beneficial to plan your expenses and outflows ahead of time.
For example, if you follow the tradition of buying gold on Dhanteras, gifts for Christmas, or participating in New Year’s Eve festivities, it would be beneficial to plan ahead of time and set aside some money. In the absence of planning, you may end up taking out a loan to cover an expense that you could have easily budgeted for.
To avoid a last-minute cash crunch, prioritize essential expenses and regular spending needs over festival shopping.
Obtaining multiple loans? Be strategic
As much as possible, avoid taking out a loan. It is always a good strategy to spend from your own corpus — the money you already have or the monthly income you receive.
During the holiday season, lenders make a variety of loan offers and attractive discount schemes available. If you must borrow, make sure you have a mix of unsecured (personal loan, credit card) and secured (home loan, car loan) loans to improve your credit score.
Above all, avoid overborrowing
Whether you want to apply for a loan soon or want to get better credit cards, having a good credit score can be very helpful because it reflects your creditworthiness, which is directly related to your financial credibility and the likelihood of defaulting. Your credit score is determined by your credit history, which includes a variety of factors such as credit card bill payments and managing various credit products such as home loans, business loans, personal loans, and auto loans.
While handling personal finances is usually second nature, the holiday season can be difficult. Increased spending has the potential to have an impact on the crucial credit score.
Why is a good credit score important?
A good credit score can also assist you in becoming financially secure because it allows for easy and quick access to funds, particularly in emergency situations. You can also take advantage of a variety of credit card rewards and perks. As a result, having a high credit score can empower you and allow you to spend more money in the future at a lower cost.
It is critical to balance the festivities with financial responsibility. A high credit score not only provides peace of mind, but it also lays the groundwork for a more secure financial future.