Steer Clear of These 3 Credit Missteps This Holiday Season

As we get ready to welcome 2015, it’s easy to ignore your credit’s safety amidst all the holiday excitement and spending. This happens partly because we forget about it and partly because we’re swiping those credit cards more often. To ensure your credit score stays healthy into 2015, keep these tips in mind for the holiday season.

First, get a good grasp of the elements impacting your credit. Don’t let myths about the FICO score put you off from aiming for that excellent 800+ range. The FICO score, which runs between 350 and 850, helps predict the risk of loan default. While many versions of this score are offered by different companies trying to sell monitoring tools, your true FICO score can change every time a credit report is pulled. Your score could go from 800 to 600 in a day, depending on what’s reported.

Several factors make up your credit score. For instance, 15% relies on how long you’ve had credit. If you don’t own a credit card, consider opening one to start building that history. For those with established credit, resist the urge to close old accounts at the end of 2014 to boost your score in 2015. Instead, just put those cards away and keep that history alive.

Thirty percent of your FICO score is based on the ratio of your current balance to your credit limits. It’s a good idea to keep your balances below 30% of your credit limits—so $300 on a $1000 limit card, for example—or spread your charges across several cards. Around the holidays, it’s common to max out a couple of cards, which can lead to stretching yourself too thin for months.

Your payment history makes up 35% of your score. This includes how well you’ve managed past and current accounts. Late payments can hurt, and collections or judgments have an even bigger impact. If there are mistakes, get in touch with credit bureaus—they might remove a few negative marks if there’s no pattern of missing payments. Clear up any collections before 2015 rolls in.

The type of credit you have counts for 10%. Lenders favor borrowers who manage regular payments, like car loans or mortgages. Inquiries and new accounts also comprise 10% of your score. Too many searches for new credit could make lenders worry about your financial wellbeing, causing them to flag your account.

By understanding these factors, you can take steps to significantly boost your FICO score in the next month, paving the way for better credit as we head into a new year.

Enjoy the holiday season, and don’t forget to keep an eye on your credit!