How I Completely Repaired My Credit from Poor to Good in 2 Years
My credit was bad. Like, real bad. I downloaded the credit app on my phone and checked it. My score was 480. Several years earlier, and it might have been even worse. My early care-free and irresponsible twenties wreaked havoc on my overall credit score, and in my mid-30’s, the consequences of my choices of my twenties was apparent. I couldn’t qualify for financing from most traditional lending sources, getting a new car was not an option without paying astronomical APR’s and a substantial down payment, and I just sort of learned how to function without the need for credit.
Having bad credit also taught me quite a few things about managing money as well. I began to only purchase things that I needed and that I could afford. I couldn’t rely on credit cards to get me through or overextend my spending. This habit still exists within me today, and I am not a materialistic person. I believe that money management is not a skill that many of us possess, and the fact that more and more people are in substantial credit card debt is evidence of this.
Struggling with money was something I have been used to my entire life. My family growing up was not rich, privileged, or even middle class. While I may not have realized it completely back then, we were certainly a lower income family. For me, struggling with money and never having enough was commonplace. That extended well into my adulthood as well. We never had discussions about the importance of good credit or the responsibilities and necessities of money management and saving.
After many years of believing that I didn’t “need” credit, I ignored the ramifications of my past spending and abuse with my credit, but as I reached my 30’s, my attitude began changing in regards to my credit. I knew it was bad, I just felt it was in a state of irreparable damage, so for years I just didn’t even bother trying to fix it. It wasn’t too far damaged, and I was able to turn my score from a 480 to 720 in less than two years. My credit score went from being considered poor to good, and very soon will reach “excellent” status. A feat that I could not have imagined just a couple years ago.
So what did I do? First, I took a really good look at my credit report. Since I had not really used credit cards for almost 10 years, I really didn’t have any established credit anymore. I had a few accounts that had gone to creditors still on the report. Second, I did research on the creditors and how to repair credit. What I had learned is that most of the companies that submit your information to creditors no longer expect the payment to be made, as it is already seriously overdue. While it impacts your credit score negatively, the company no longer deals with overdue balance, and is turned over to the credit company. You can contact the company to make a payment on the account or get a significant reduction for paying it off in full.
I didn’t have to do any of that. I also disputed the charges, mostly because the information on the accounts did not specify what it was for or where, and I wanted to know what I was going to be paying off. By disputing the charges and asking what the charges were for specifically, every single one of my accounts were removed from my credit report. I am not saying that will happen for you, but you can dispute and ask for details on the account before paying. In my case, the creditors no longer had contact information, and so those past payments were expunged from my record. Almost immediately, my score improved from poor to fair. My score was 600, just from taking a little time and putting some effort into reaching out and asking questions.
A score of 600 wasn’t the end all. While negative reports were removed, I still didn’t have any established credit on my account. I needed to now start to establish credit. I began with a plan. I would sign up for a prepaid credit card, which started with a higher APR that I would use for small purchases and pay off, trying to keep the credit card utilization at less than 30% every month (the percentage of your overall credit limit vs the amount used). Within the first six months, I was diligent in ensuring my card was paid on time, and never late. By keeping my utilization low, within the first year, my credit limit was increased from the initial $300 to $1000. I also now qualified for a zero interest for a year credit card and a lower APR after the first year. I signed up for my second card, again, keeping the focus on a 30% utilization or less between ALL my cards. I was approved for $1000. While this doesn’t seem like a lot now, it was the most I had ever been approved for on a card, and I started to feel like I had a good handle on my credit situation.
Today, my credit score is 720 and will most likely increase dramatically after paying off the last of my credit card. My utilization is now under 5% and I only use my cards for small, recurring payments for my monthly expenditures like my cell phone, entertainment sources like Netflix, Hulu, etc, and my travel through my EZ-pass. The rest of the balance is there for emergencies only.
My credit is the best it has ever been, and it is only getting stronger. If I could give advice to anyone that feels overwhelmed or stuck in the bad credit situation, it is this:
1) Do research on your debt. Find out how much you owe, what it is for, and put a plan in place to pay it off.
2) Know your score and devise a plan on improving it. Over time.
3) Be Patient. Going from poor to good credit took almost 2 years. It is not an overnight process, and is the sum of consistent good spending choices.
4) Use your credit cards to rebuild credit and for emergencies only, not for frivolous expenditures on all the things you want. Your credit balance can quickly compound when you use it to buy everything, and that is where the overwhelming debt can take hold.
5) Keep your balance under 30% of your total credit. The lower the utilization, the better.
6) Dispute any charges on your account that you are not 100% clear on what it is. Get the details.
7) Creditors want to remove the account from their system. They will often offer a substantial discount if you can pay that lower balance in full.
8) If you do get approved for larger purchases over an extended period of time, create a plan to pay off the purchase early and stick to it! Not only will the reduce the overall fees from interest that you will have to pay, but reduces the amount of time you might have to stress about paying the additional payments.
Financial responsibility and credit are important, don’t make the same mistakes I did and wait as long to start repairing your credit.