The end of the year is well-known for being hard on your credit cards. It’s a time of high spending and lots of work for financial institutions of all types. Unfortunately, that means that it’s a time when mistakes are both more likely and more damaging.
Having a holiday credit error on your report can affect your finances year-round. Your credit score is a crucial metric that financial institutions use to determine whether you’re worthy of receiving a loan, renting an apartment, or even opening a new credit card. Here’s what you need to know about how the holidays can affect your score and how to fix it.
How Your Credit Score Is Monitored
Credit scores have only been around since the mid-80s. These scores are designed to track consumers’ behavior and determine if they’re creditworthy, meaning whether or not they are a safe person to whom to extend a loan. To do so, these companies track six main aspects of how you use your credit:
- Age: How long you’ve been taking out loans
- Utilization: How much of your total loan limits you’re using
- Payment history: The percentage of payments you’ve made on time
- Total accounts: How many loans and lines of credit you have at once
- Inquiries: How many times you’ve requested a new line of credit in the past two years
- Black marks: Collections, bankruptcies, civil judgments, and liens that demonstrate you’ve failed to repay a loan
Agencies like FICO and VantageScore collect this data from your creditors and compile it into a single score between 300 and 850 that summarizes how well you do at repaying loans.
Typically, a score of 740 or above is considered very good, and 600 and below is very bad. Higher scores help you get lower interest rates and faster loan approval. If your score is too low, you may not be able to get any loans at all.
Why the Holidays are Hard on Credit Scores
The holiday season and the new year are the last time you want your creditworthiness damaged. It makes it harder to get loans you might need in the coming year and can raise your interest rates on your current cards. While a good credit score is particularly important right now, this time of year also poses issues. In fact, right now, errors and problems are more likely. There are two main reasons why the end of the year is so hard on your score:
Identity Theft
If you’re like many people, you probably make many of your holiday purchases online. Unfortunately, not every online store is trustworthy. It’s all too easy for hackers and malicious scammers to grab your information from unsecured digital stores.
Once someone has your address and bank account details, it’s easy for them to steal your identity. They may open up new accounts in your name, take out loans, or simply make purchases in your name. Regardless of the thief’s actions, identity theft needs to be dealt with immediately, or it can permanently damage your finances.
Missed Payments
With the high number of transactions many companies face over the holidays, sometimes details slip through the cracks. For example, if someone in the payment office misses a single checkbox, they might fail to acknowledge your payment and report a late payment to the credit bureaus.
That will absolutely hurt your score. Your percentage of on-time payments is one of the most essential criteria for creditworthiness. A single late payment can drop your score by as much as 180 points. If a creditor fails to record your payment appropriately, you may even end up in collections for a bill you actually paid.
Fixing Credit Errors the Right Way
But what should you do to fix these issues? You don’t need to simply accept them. Instead, you can take action to improve your report during the busiest time of the year.
Monitor Your Score Regularly
You can’t fix issues unless you’re aware of them. This time of year, use a service like CreditKarma or Mint to monitor your score weekly. You’ll be able to spot problems as soon as they crop up instead of finding out about errors when they impact your daily life.
Dispute Issues Immediately
As soon as you notice a credit error, it’s time to take action. It’s easier to request deletion or correction of incorrect data when it’s relatively recent. Furthermore, a fast dispute keeps the false information on your score from hurting you if you want to apply for a loan or make a large purchase.
Provide Evidence and Facts
If you can, provide evidence that the information on your report is false. For instance, if you’ve been dinged for late payments, provide receipts that prove you paid on time. Similarly, if someone put charges in your name, confirm that you weren’t in the location the charges were made. This evidence makes it more likely that your request will be approved in a reasonable amount of time.
Talk to Creditors as Well as the Bureau
It’s just as important to talk to the creditor who reported incorrect information to credit bureaus as it is to speak to the bureaus themselves. If the creditor doesn’t correct their reports, then the false information will pop up in your report again. Give them the same evidence and explanation you gave to the bureau and ask them to correct their records.
Keep Your Credit Score Safe
Just because the holidays are risky for your credit doesn’t mean that damage is inevitable. You can protect your credit just by monitoring it regularly and watching out for unusual activity. In many cases, your creditors and the bureaus will help you resolve errors without issue.
However, that’s not always the case. If you’ve discovered errors on your report that the agency won’t let you fix, it’s time to get help. You can consult with an experienced credit error attorney to decide your best course of action. Schedule your consultation today to prevent the holidays from ruining your credit score for good.
