We are in the midst of the holidays, and now it is time to face the music. The consequences of our actions will creep up on everyone with no patience, no avoidance, just fact. The holidays are made of more than gift wrap, the smell of cookies in the air, and lights in the trees. As magical as that is, something bitter is often added into the mix: winter holidays are also made up of receipts and building credit card debt. Last year, CIC’s quarterly analysis revealed that residents’ FICO scores trended down following the holidays. We expect that this year, the same thing will happen.
To be fair, not everyone faces this problem of holiday debt. Some people plan for smaller affairs. They do not want to stand on ceremony, throw parties, or have friends travel in for the event. Some people prefer staying at home. Others desire the end of the year adventure to be one to remember. That means large purchases of several presents, plane tickets, big dinners or vacations, even all of the above.
All of these fees, price tags, and tickets could be loaded onto credit cards or debit. Maybe they planned for this and were okay with the payment plans or even the dip in their credit score, and perhaps they hadn’t thought so far ahead.
This is why we expect to see a dip in FICO scores in the seasonal holidays portion of the year, just like last year.
Many people tilt their utilization ratio, spending more than they usually do. Even if they make the payments on time, this shift outspends their available credit. November and December are often costly months for many people, whether by choice or caving to societal pressures to think big and keep up with the Joneses. Some people look forward to this period of the year for all twelve months and don’t mind the larger electricity bills if it means putting smiles on their loved one’s faces as they celebrate, such as large holiday ornaments on their lawns, roofs, or electric lighting in their trees. It doesn’t help that even the price of a Christmas tree is on the rise.
Another large issue is identity theft, which rises during the holidays. 43% Of shoppers state that their identity was stolen while they were shopping online for the holidays. Identity theft can be a massive hit to one’s FICO score, especially with the spike during the season.
Despite the potential downturn of resident and applicants’ FICO scores, this is not a red flag to be concerned (apart from those suffering from identity theft). Often, FICO scores bounce back into place in the spring, as people have paid off their holiday purchases and return to their regular, expected spending habits. Without the ability to predict the future, this can’t be known for sure if your renters’ FICO score will bounce back, or plateau.
It’s important to be prepared as you scan for new renters or update your benchmarks for future residents.