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It’s January, the month of financial triage.

You may have made it through the holiday season without blowing your budget, but you need to review your accounts. Why? Because even if you kept with your spending plan (and especially if you didn’t), your credit scores could take a hit from the holidays.

Can You Pay Your Bills?

It can be fun to get caught up in the December shopping craze, but getting the bills this month may not be quite as enjoyable.

If you find yourself with bills you can’t afford, it’s still important to pay as much as you can and to do so on time. Missed or late payments will have an adverse affect on your credit scores, because payment history is a major factor in your credit scores. In fact, payment history makes up 35% of your credit scores. You can see how your payment history is affecting your credit scores using the Credit Report Card, a tool that shows your Experian credit score and VantageScore 3.0 for free.

Carrying a balance is better than missing payments, but don’t let the debt get out of control. See if you can cut your spending in other areas to make up for the holidays. If you normally carry a balance and have added to it excessively, now may be a good time to re-evaluate your plan for reducing debt.

If the credit card with a balance has a high interest rate, see if you can qualify for a good card with a favorable balance transfer promotion as a way to cut down on what you pay in interest.

How Much Credit Did You Use?

Debt usage is the second most important part of your credit history, when it comes to scoring. (A glance at your Credit Report Card shows it makes up 30% of your scores.) Despite being able to pay your bills, you may have used too much of your available credit and caused a drop in your credit scores.

Ideally, consumers should try to keep their debt at no more than 10% of their available credit, and it can be easy to blow past that benchmark during the high-volume shopping months at the end of the year. The important thing is to pay down the debt and get your credit utilization ratio as low as possible. The less you use of your available credit, the higher your credit scores will be.

Based on how well your budgets fared in December, now is a good time to think long term. It’s a lot easier to handle holiday spending when you’ve been saving for a while, so consider setting aside holiday money for next year now.

More on Credit Reports and Credit Scores:

Image: Jon Schulte

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