Highlights

• Pay special attention to your credit use during the Black Friday shopping sales
• Overspending or applying for multiple credit accounts may harm your credit score
• Protect your credit health by setting a shopping budget and regularly checking your credit report.
   

The Black Friday sales frenzy is almost here, but before you start loading up your shopping cart, be mindful of the potential impact on your credit score if you’re using credit or short term finance. The temptation to overspend and impulse-buy is high during pre-Christmas sales, but the resulting hit to your Buy Now Pay Later (BNPL) or credit card accounts can lead to a long and painful holiday debt hangover. 

If you get caught up in the excitement of a bargain and lose track of spending, here’s how your credit score could be affected.

1. Impulse purchases and credit card debt before Christmas

If you’re planning to pay for your Black Friday haul with your credit card and you don’t end up clearing your debt within your interest-free period, you could face high interest charges. Making only the minimum repayment will see your credit card debt before Christmas balloon, potentially taking years in interest to repay. 

Late or missed payments for credit cards or any other credit product are recorded on your credit report and can have a negative impact on your credit score.
 

2. BNPL credit check - new rules​

While BNPL wasn't always treated like 'normal' credit, new regulations in Australia mean these services are now subject to the National Consumer Credit Protection Act, requiring providers to take reasonable steps to verify a customer’s financial situation. This means, every time you apply for a new BNPL account, it will likely trigger a BNPL credit check (a hard enquiry). 

Crucially, late or missed BNPL payments can be reported to credit reporting bureaus. Just like a missed credit card payment, a default or significant lateness on a BNPL plan can negatively impact your credit score for years.  Juggling multiple BNPL repayments across different providers only increases the risk of a late payment, further eroding your credit health.
 

3. Multiple credit applications impacting your credit score

Every time you formally apply for credit - a new credit card, a personal loan, or even some BNPL accounts - a 'hard enquiry' is recorded on your credit report. Lenders see numerous credit enquiries in quick succession as a sign that you might be in financial distress. This can have a negative impact on your credit score, potentially lead them to view you as a higher risk borrower, and make it harder to get approved for bigger loans (like a mortgage) in the future.

Tips to protect your credit score when Black Friday shopping 

Check your credit report

Before you hit the Black Friday sales, take a moment to understand exactly what your current financial footprint looks like as outlined in your credit report. You're entitled to a free copy of your credit report from credit reporting bodies like Equifax every three months. Taking the time to review your report allows you to:

• Spot errors: Ensure no inaccuracies are mistakenly damaging your score.
• Track enquiries: See how many credit applications have been logged recently.
• Monitor debt: Get a clear picture of your current credit obligations.

Monitor your spending closely

For active shoppers, constant vigilance is key. At Equifax we offer a subscription service that can provide automatic alerts to key changes on your credit file, such as when a new credit enquiry is made. This allows you to quickly address any suspicious activity or unexpected credit applications during the sales frenzy. Plus, cybercriminals know that consumers are especially vulnerable this time of year, so it's important to stay on top of your charges.

Create a Black Friday budget​

Before the deals go live, your first task is creating a detailed shopping list that includes the items you genuinely need and an estimated cost for each. Tallying up the total allows you to see the financial outlay upfront. If the number looks scary, adjust it before you start browsing. Sticking rigidly to your list will reduce impulse buying, help you comparison shop effectively, and is the strongest way to safeguard yourself from over spending and incurring a debt that you can’t manage, which in turn can negatively impact your credit score.

Think carefully before opening new store credit cards​

During Black Friday checkout, you might be tempted with extra savings if you sign up for a branded store card, but be aware that store cards often carry high interest rates. This means if you end up carrying a balance - which is easy to do during the Christmas shopping season - the high interest can quickly wipe out any bargain you got. Protect your credit score by limiting these unnecessary applications.

Use existing credit wisely

If you use a credit card or BNPL, treat it like cash and ensure you have the funds ready to pay the balance in full before the due date.

Don't let Black Friday's irresistible deals turn into a red flag on your credit report. Shop smart, not impulsively, and keep your credit score safe.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.