Looking for the “perfect gifts,” paired with enticing retail discounts and deals, can pressure holiday shoppers to spend more than they can afford. As a result, consumers may max out credit card limits or miss payments, negatively affecting credit scores. In addition, store credit cards may offer instant discounts that are tempting at the register — but that new application could decrease your credit score.

Not having enough money for presents and the strain holiday shopping puts on their finances are big causes of anxiety for many consumers, according to a recent Experian survey. However, many of these same consumers seem to be on the right track: in the survey, respondents listed several smart financial resolutions, including 28 percent who want to improve their credit scores, while almost 50 percent said saving more was a New Year’s resolution.

But understanding how your credit score is calculated is critical. With this mind, here are some key factors:

• Payment history: Accounting for roughly a third of your credit score, paying loans on time is crucial; too many late payments can decrease your score.

• Balance: You never want your credit card balance to be higher than 30 percent of your credit limit – on a single card and across all of them. Keep balances low to keep your score high.
• Credit history: Those who’ve never used credit before will likely have a low score, or no score at all, while credit accounts that have been active for a long time reflect positively on your score, as does a healthy mix of accounts, such as having a mortgage, a few credit cards and auto loans.

• Staying out of hot water: Many people believe that financial transactions like rent, utility and telecommunications payments impact credit scores, but in fact, these are not factored in by many scoring companies. However, if you don’t pay bills and they get turned over to a collection agency, this could affect your credit score. Severely delinquent accounts are often reported to the credit bureaus.

“While it’s fun to give to others during the holidays, make sure to give yourself the gift of not getting into debt,” says Rod Griffin, director of Public Education at Experian. “Stick to a shopping budget. Only use credit cards for an amount you can pay off and pay the bill in full on time. You’ll lose your cheer quickly after the New Year if you face a mountain of debt.”

A positive credit profile and history of using credit smartly can open up financial opportunities, like getting a car loan or home mortgage. There are clear benefits to building your credit file, but if you don’t build it responsibly those gains won’t be felt. To plan for the holidays and 2019, visit experian.com/education for information about credit scores, as well as personal finance tips.

“Credit is a tool to be used wisely,” adds Griffin. “If you check your credit score regularly and make strategic decisions on when and how much credit to use in the short-term, it will benefit you when you absolutely need credit to make a large purchase or for an emergency expense.”