What Your Credit Score Says About Your Holiday SpendingFriday, December 14, 2018
It’s easy to turn a blind eye to credit card and bank account statements as you buy holiday gifts for your loved ones. But once the holidays wrap up, you could be faced with the aftermath of holiday spending. Alternatively, you may just be a born budgeter who planned perfectly for the holidays with cash to spare.
No matter where you fall on the spending spectrum, one interesting outcome of holiday spending is your resulting credit score. We’ve broken down the different credit ranges and what they might reveal about your holiday spending habits.
CREDIT SCORE OVERVIEW
Before we jump too far into the different credit score ranges and holiday spending, it’s important to know where your credit score comes from. There are two scores that are most commonly used in consumer credit score reporting: FICO and VantageScore.
On credit reports from either FICO or VantageScore, lower scores will result in less desirable credit ratings. A lower score indicates a higher risk for a lender. On the flip side, a high score signals a lower risk. Lenders use credit ranges to determine if a potential loan or other credit (such as a credit card) to a borrower is worth the risk. Let’s see how your holiday spending may have affected your credit score.
NO CREDIT SCORE
Whether you paid for all your gifts in cash or simply didn’t spend a lot this holiday season, a lack of credit score usually means you don’t yet have a credit history. Many young adults don’t start building a credit history until they reach college age or beyond. Unfortunately, having no credit score is assessed similarly to a poor credit score. Lenders make that assumption because they don’t know (yet) if you can pay back debts or not. It may be more challenging to get approved for a credit card to make holiday purchases without a credit score. Don’t worry, everyone has to start somewhere. Ask the American Savings Bank team how you can start building your credit today.
POOR CREDIT SCORE
Credit scores between 300 and the low 600s are generally considered poor scores. Reasons someone might have poor credit include defaulting on multiple loans or missing credit card payments. During the holidays, a person who racks up large credit card bills on gifts and doesn’t pay the minimum monthly payment may see their credit score dip into this range. People can also fall into this category because they are rebuilding credit after a bankruptcy, which can stay on a credit report for up to 10 years.
FAIR CREDIT SCORE
A fair credit score is usually considered to be a score in the mid-600s. While a fair credit score isn’t the best, it can potentially help you get approved for a secured credit card for your holiday spending. Having a fair credit score may mean you’ve missed several credit card payments or other payments. The holiday season can be overwhelming with meals to prep and gifts to wrap, so it’s easy to see how someone might miss a payment. You can avoid missing a bill payment by scheduling payments with our bill pay service.
GOOD CREDIT SCORE
A good credit score is generally in the high 600s to low 700s and is the average score for most consumers. With a good score, you have a higher chance of being approved for credit like a personal loan. Your good credit score indicates you are responsible by paying your bills on time and rarely maxing our credit cards. Improve your good score during the holiday season by sticking to your budget and avoiding overspending.
VERY GOOD CREDIT SCORE
Consumers with a very good credit rating usually have credit scores in the mid to high 700s. If you have a very good score, you are likely to be financially responsible. You likely pay all your bills on time and have never defaulted on a loan. Paying down your credit card balance regularly may have helped you keep your holiday spending in check. Additionally, you might have planned ahead for the holidays and used a savings account to save throughout the year, allowing you to cover holiday expenses without relying on credit.
EXCELLENT CREDIT SCORE
The top tier of the credit rating system is usually considered to be in the high 700s,up to the highest score of 850. People with excellent credit may have their saving and spending down to a science. If you have an excellent credit rating, you likely planned an accurate and realistic budget for the holidays. More importantly, you were probably responsible in your spending and stuck to your budget to avoid high credit card bills.
No matter what your credit score is, it’s important to maintain or develop good credit all throughout the year. Need help with your credit? Consider reaching out to one of our ASB teammates today by stopping by one of our conveniently located branches throughout the state!
Phone: (808) 539-7907