Even the most carefully planned budgets can be thrown off by last-minute expenses.
When savings and discretionary income fall short, many Americans turn to credit to bridge the gap. In fact, nearly half of Americans are still paying off debt from last year’s holiday season, according to a recent WalletHub survey.
The trouble is, racking up debt often lowers your credit scores and puts a strain on your overall financial health.
Read on to discover practical tips from U.S. News & World Report editors on how to curb credit score damage and keep your finances in order.
[READ: 6 Unforseen Expenses and How to Budget for Them]
Practice Healthy Financial Habits
“To keep your credit score strong, adhere to those year-round good financial practices,” says Susannah Snider, certified financial planner and managing editor of the money section at U.S. News & World Report.
That means keeping your credit utilization ratio — or the amount of available credit you use — to less than 30%, staying on time with monthly bills and paying off your credit card each month, if possible, she adds.
Be Cautious About Taking on Debt
“Be cautious about taking on debt, always. Maxing out your credit cards can do a lot of harm; ‘amounts owed’ accounts for 30% of your FICO credit score,” says Whitney Wyckoff, managing editor of the credit cards and loans sections at U.S. News & World.
If you do take on debt, Snider says be sure to have a plan to pay it back.
The beginning of the year is also a good time to check in on your credit reports.
“If you haven’t checked your credit report recently, now’s the time. Make sure you look carefully at your personal financial information and report any errors. You can access your credit report by visiting AnnualCreditReport.com,” Wyckoff says.
“You want to ensure that you’re not spending in a way that will prevent you from staying current on monthly bills and paying down your credit card each month. So, take some time to determine your budget and say no to all the spending pressure that doesn’t serve you — and your financial health,” Snider says.
Keep Your Card Balances Paid Off
“Be careful that big purchases don’t cause your credit card balances to rise too high. A rule of thumb is to maintain balances of less than 30% of your credit limit. If you can do 10%, even better,” says Raymond Frager, assistant managing editor of credit cards, loans and banking at U.S. News & World Report.
If large purchases are going to raise your account balance too close to your credit limit, he recommends making payments during the month before your due date.
“If at all possible, pay off your full credit card balance each month. And absolutely do not miss making at least your minimum payment by the due date. Nothing ruins your score like missed payments,” Frager says.
[READ How to Rebuild Your Credit After a Missed Credit Card Payment]
Channel the Grinch Next December
“To keep your credit score strong during the December holiday season, it helps to channel the Grinch,” Snider says. That may mean saying no to pricey outings and expensive gifts. It could also mean opting out of a holiday sale or declining to open a store credit card.
“You want to ensure that you’re not spending in a way that will prevent you from staying current on monthly bills and paying down your credit card each month. So, take some time to determine your holiday budget and say no to all the spending pressure that doesn’t serve you — and your financial health,” Snider says.
[Start a Dedicated Holiday Savings Fund Now for 2025]
Begin the Year on a High Note
It’s easy to get swept up in the holiday spirit and let financial best practices slide. But don’t let one month undo the progress you’ve worked hard to achieve all year.
A key piece of advice from the editors is to keep your credit card utilization below 30%. To make this easier, calculate 30% of your credit limit for each card, so you know the spending cap to stay under. For instance, with a $1,500 credit limit, aim to spend no more than $450.
Beyond that, consider each purchase carefully in the context of your larger financial goals. Overspending can impact other goals and experiences you’re working toward. Keeping this broader perspective can help you stay on track.
More from U.S. News
5 Reasons to Keep an Eye on Your Credit Score This Holiday Season
Everything You Need to Know About Credit Scores
How Much Available Credit Should I Have?
U.S. News Editors Share How to Avoid Credit Score Drops in the New Year originally appeared on usnews.com
