Plenty of us are guilty of overspending during the holiday period, but this carefree attitude to money can end up damaging your credit score in the long run. Below are some silly season-spending habits to avoid if you want to keep your score in check.
Gambling at the spring races
The races alone won’t harm your score, but these events are usually linked to gambling. While having the occasional punt is harmless (as far as your credit report is concerned), problem gambling will wreak havoc on your credit score.
Gamblers will often use several credit cards to fund their habit, all of which appear on your credit file. Betting transactions are also classified as cash advances, which means they attract a much higher interest rate than regular purchases – plus a cash advance fee.
If you’re unable to keep on top of your monthly repayments, your interest will start to skyrocket. When this happens, it’s easy to get trapped in a debt cycle that can be difficult to break. If you are planning on heading to the races this spring, bet responsibly – and maybe leave the credit card at home.
Leaning on buy now pay later
More Aussies are turning to buy now pay later (BNPL) than ever before. And while it can be handy to pay for items over a longer period of time, BNPL can be sneaky if you aren’t careful.
Customers aren’t required to do a credit check before signing up, but if you fall behind in your repayments, BNPL services can report you to credit agencies. This will appear as a negative listing on your credit report, which in turn will drag your score down.
If you do choose to use BNPL, make sure you can afford to pay the fortnightly installments. You don’t want to end up with a budget blowout and a damaged credit score.
Overspending with a credit card
Last Christmas, Aussies ended up with a $29 billion debt hangover thanks to credit card spending.
Credit card debt can drag your score down, as can late payments after a certain period. So maybe think twice before footing the bill for a group dinner, shouting another round of cocktails at the bar or shopping up a storm at the sales.
Missing bills or repayments
Plenty of Aussies head interstate or overseas over the Christmas break. Unfortunately, bills and repayments can quickly be forgotten when you’re in holiday mode.
Being a couple of weeks late with your repayment isn’t going to damage your credit score, but defaults will. Late repayments become defaults after six weeks, and these can linger on your credit file for up to five years. To prevent this from happening, set up automatic repayments or direct debits to cover any bills due while you’re away.
Consider setting a budget
Groceries, holidays, home repairs, medical bills and presents are just some of the endless expenses that seem to pop up over the Christmas period. Keeping track whilst trying to enjoy the silly season, can become difficult. To avoid unwanted debt, consider setting up a budgeting plan to help monitor your holiday finances.
A budgeting calculator can help you quickly assess how much money is coming in over the holiday period, and how much is going out. From here, you can set budgets for things like presents, repairs, eating out and so on. Alternatively, try noting down all your holiday expenses in your phone and set realistic price limits for each expense. Being aware of what you have coming up can help you avoid unwanted Christmas debt.