The countdown to a new school year is on. Between school supplies, new clothes, shoes, backpacks, and technology, back-to-school shopping is one of the busiest and most expensive shopping seasons of the year.
This year, many families are feeling the pinch more than usual. According to the National Retail Federation, families with children in K-12 plan to spend an average of $863.86, contributing to a record-breaking $43.3 billion in total expected national spending. KPMG’s Consumer Pulse survey found families expect to spend about $252 per child, a 6% jump from last year. While rising prices are driving much of the increase in household spending, research from PwC shows that students’ buying decisions are heavily influenced by social media and digital wish lists. Parents are projecting an average total spending of $922, and nearly half (47%) are bracing to spend more than last year.
Before you head to the mall or start adding to your cart, it’s worth thinking about how this shopping spree could affect more than just your bank account. A few common back-to-school habits can quietly chip away at your credit score if you’re not careful.
The Store Credit Card Trap
One of the most common offers when walking into almost any clothing or electronics retailer this time of year is a discount for signing up for their store credit card. Saving 10% or 15% off a cart full of new clothes is tempting, but before you apply it’s important to know the consequences.
It triggers a hard inquiry. Every time you apply for a new credit card, the lender typically pulls your credit report, and that inquiry gets logged. One inquiry usually has a small impact on your VantageScore credit score, but if you’re applying for several new accounts over a short period, it has a greater effect. A few new inquiries can make the difference between approval and rejection for lenders.
It changes your credit mix. Once approved, that new account gets reported to the credit bureaus and appears on your credit reports. Newly opened accounts will lower the average age of the accounts on your reports, which could decrease your credit score. While this effect generally becomes less significant over time, it’s something to consider before opening multiple new accounts simply to receive a one-time discount.
It can spike your utilization. Store cards often come with low credit limits, usually lower than $1,000. That means even an ordinary back-to-school haul (new sneakers, a backpack, a few outfits) can max out a large chunk of that limit fast. Your credit utilization ratio, which is how much of your available credit you’re using, is one of the more heavily weighted factors in your VantageScore credit score. So, keeping that ratio as low as possible will keep your score from dipping too low.
The good news is that opening a store credit card doesn’t automatically hurt your credit. Like any credit account, the key is how you manage it.
Five Ways to Protect Your Credit During Back-to-School Season
- Pay it off quickly. Your payment history is the most important factor considered by VantageScore, so don’t let a back-to-school balance linger into October. Even one missed payment can have a lasting impact on your credit profile.
- Keep balances as low as possible. Using only a small portion of your available credit can help maintain healthy credit utilization.
- Avoid opening multiple new credit accounts. If you’re shopping at several stores, think carefully before accepting every credit card offer. Multiple applications in a short period may affect your credit. So, pick the discount that matters most and pass on the rest.
- Be cautious with financing options. Buy Now, Pay Later (BNPL) plans and other financing offers can be convenient, but not all providers report payment activity to the nationwide credit bureaus. Before choosing a financing option, understand the repayment terms and whether the provider reports your account activity.
- Think ahead if you’re planning to borrow. If you’re expecting to apply for a mortgage, auto loan or other major financing soon, it may be wise to postpone opening new credit accounts until after your loan has been approved.
Small Decisions Today Can Make a Big Difference Tomorrow
Back-to-school shopping is an important annual tradition, and taking advantage of sales and promotions can absolutely make sense. The key is balancing today’s savings with your long-term financial goals.
A strong credit score is built over months and years, not lost over one shopping trip, but back-to-school season is exactly the kind of stretch where a handful of small decisions, repeated across several stores, can add up. A little awareness now on using credit responsibly can save you a bigger headache later.
Learn more tips on how to keep your credit in good shape year-round: How to Build Your Credit.
