Bad credit seriously reduces your financial options. There are many reasons why you may have bad credit, including a previous bankruptcy or a lack of employment. It can take five years or more to turn a bad credit record good. The holidays are a problem because it usually means a sudden spike in spending. That’s bad news for credit companies, which is why your score goes down as a result. There are ways you can handle the stress of bad credit through the holidays, though.
This is the most obvious solution. You shouldn’t go over 35% of your credit limit if you want to avoid a penalty on your credit score. Anything over 35% is a sign that you may be relying on credit. Whether it’s right or wrong, you have to stick below this number. By spending less, you can do just that, while still covering most of your Christmas spending.
Save in Advance
There are only limitations on your credit spending. There’s absolutely nothing wrong with saving in advance and spending as much as you like. It’s what we recommend for anyone suffering from the stress of bad credit during the holidays. Open up a separate savings account and put a small amount into it every month or so. This will quickly build a nest egg you can use without eating up your credit limit.
Use a Layaway Program
Many retailers place a lot of faith in their layaway programs. These are schemes where you can pay in advance for items over a specified period without going into any debt at all. Some stores only offer them during the holidays, but with others, you can start paying for Christmas months in advance.
How does it work?
- Buy the item you like without using a credit card.
- Make the first down payment.
- Pay off the amount over a specified period.
Big brands like Kmart, Sears, and Walmart are just some of the companies offering the layaway program.
Use a “Bad Credit” Credit Card
Credit cards specifically for bad credit are an option if you have no other ones left. Sometimes you don’t have any credit at all if you’re coming off a bankruptcy, or you simply can’t get a card from anyone else. These “bad credit” credit cards have extremely low limits, but they allow you to spend without having a high credit score. You should use these strategically. Try not to use more than a few dollars or you could find yourself with an even lower credit score because you have gone over ‘acceptable’ limits.
A similar option is to find a company that provides loans for people with poor credit. The interest rates will be much higher but you can usually get loans up to $2,500. Tip; try selling items around the house that you don’t use first to avoid these bad credit loans.
Get Creative with Your Gifts
Alternatively, the ideal solution can be to avoid using any credit at all. Christmas isn’t about the expensive gifts you buy. It’s about family, friends, and spending time with them. Those are the moment’s people remember long into the future. If money is a problem, you don’t have to buy things you can’t really afford. Get creative with your gifts and make them by hand. Handmade soaps and cakes say far more than the latest games console. You can even get the kids involved and do it together.
Holiday stress is increasingly common, and bad credit is a sad part of it. Nevertheless, you don’t have to let it ruin the festive season. Through proper planning and understanding what you should and shouldn’t do, you can have a very merry Christmas.