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How I Raised my Credit Score From 464 to 686 in Two Years!

Like most of you when I graduated high school I was 18 and considered an “adult”. But honestly, I knew NOTHING about how to function in the real world. My mom could no longer call me out of work, Jury Duty was mandatory, and credit cards were exciting.

My favorite stores wanted to give me “free” money for a huge shopping spree and all I had to pay was $25 a month?! SIGN ME UP!

My thought process was: I work too hard and never have any money for me. If I get 5 credit cards that have $25 minimum payments then that is only $125 a month/$63 a paycheck. I thought that was more than fair to have beautiful things I wanted but couldn’t pay full price for.

I never in a million years thought it would bring me down the journey it did. At 18 years old I learned all about EXTREME credit card debt and how my mommy and daddy couldn’t just make it all go away.

4 years later I was still suffering from the mistakes I made. I remember crying on the bathroom floor feeling hopeless after getting ANOTHER collections letter. Why didn’t anyone teach me about this? I felt betrayed and abandoned.

BUT there is a positive side to this story and 6 years later I am proud to say I am DEBT FREE and raised my credit from a 420 to a 680 in just two short years. Somehow I achieved the impossible.

The Catch-22: You NEED credit

Unfortunately, you can’t pay cash for everything in life. At some point sooner or later, you will need to have credit established. Buying a car, buying a house, and even some jobs all require credit checks and if you have no or bad credit then they won’t lend to you or even hire you for the job. If you are wanting a job in finance but have terrible credit you can kiss that job goodbye.

Many of us can’t afford $20,000 in cash for a new car or have $300,000 in cash to buy a house. If you start now you can establish your credit when those times come and get lower APR rates. I found this great article that explains APR way better than I could. Click here.

The best way to start establishing your credit is with credit cards. However, there is a wrong and a right way to do this. When I was 18 years old I did it the wrong way and got myself into MASSIVE debt. It took me 5 years to dig myself out of the black hole and that’s pretty lucky. DO NOT MAKE THE SAME MISTAKES I DID!

When my husband and I got together he didn’t have any credit established because he always stayed far away from credit cards. I knew with me rebuilding my credit that one of us had to have good credit or we will start our marriage off in massive debt.

A few years ago he opened a credit card through his bank Chase. It had a small limit on it but was a great way to get started. He would only spend as much as his paycheck. So say he makes $1000 bi-weekly at the time, then we would only use $1000 on the card. Every time he got paid he paid the balance on the card in full and then used the card again for all his purchases. Even though the credit limit was more than $1000, he only spent as much as his paychecks were.

This skyrocket his credit FAST. By doing this he showed that he actively used a line of credit but was able to pay off in full twice a month. He was showing creditors he was managing his money well and could repay debts with ease. Even if his monthly income after tax was only $2000, he was showing creditors he could make $2000 a month in payments.

If you are trying to establish credit I advise you to get a visa card you can use for gas, bills, and groceries. All cards have a cash advance line where you can take cash out of the ATM. If you stick to the rule of paying the balance in full every paycheck, then you won’t be affected by high APR rates that get you in debt quick.

Understanding Visa & Store Credit Cards

In June 2016 I owed $10,321 in debt with multiple missed payments and I was only making $760 a month. My car payment was $165, my Cell Phone was $250, and my share of PGE/Water was between $200-$400 a month depending on the time of the year. How the hell was I supposed to feed myself let alone pay off $10k in debt?!

After feeling so miserable and so stuck at a young age, I decided to turn this fear into action and learn what my options are.

My first step was taking the time to understand how credit cards work. What the heck is an APR and why did month after month of making the minimum payment did it seem like my bills were going down by only a few mere dollars.

Remember that APR we learned about earlier? Well even when you stop charging the card, you will still earn interest every month and some cards even have monthly service fee’s on top of that. So, for instance, I owed Buckle $1092 and had an interest rate of 29.2%. That means every month that I didn’t pay off the balance and made the minimum payment, I was charged roughly $316 in interest.

Ex: My balance is $1092 and I made a minimum payment of $25. My new balance is $1067 but then at the end of every month, I am charged 29.2% in interest. $1067 x 29% =$309 interest charge. $1067 + $309 =$1376.

Isn’t that insane?!! That is why it is SO important to NEVER spend more on credit than you can pay in cash.

Important note: Credit card/financing companies that offer interest-free for X months are great to utilize. However, you need to make sure you can pay off the entire amount in the months of the promotion. As soon as the months are over you will then be hit with an interest charge dating back to the very first month you made the purchase. I repeat: ONLY SPEND ON CREDIT WHAT YOU CAN AFFORD IN CASH!!!

It literally says on your bill, “If you make the monthly payment your bill will be paid off in 11 years.” So that tube of mascara or clothing splurge you went on one day, you will still be paying off 11 years later.

If you can’t afford to pay off the whole balance, try making a substantial payment every month. Instead of the minimum try to do double the minimum or $100 if possible.

Please remember making the minimum payment is better than making no payment. If you skip payments you are severely damaging your credit and acquiring late fees on top of interest charges on top of monthly service fees. It can literally drown you.

Credit Report June 6th, 2016

Utilizing Credit Karma

Discovering Credit Karma was the best thing to do for me and my credit. I have been a member for three years and never once had to pay for anything! 

Credit Karma shows you your score form the two major credit agency Equifax and Transunion. You are able to see what is different on both reports and dispute any errors. I am not even kidding but this company helped me pull myself out of debt so quick without paying them a dime.

On Credit Karma, you can see exactly what is affecting your score and how big of an impact it has on. It shows you things you don’t need to worry about and areas you really need to stress to clean up. It updates twice a month and is a great tool for rebuilding your credit!

Because of Credit Karma, I learned the importance of making an on-time payment, keeping my balances low, and NOT applying for every credit card under the sun (hello Hard Inquiries).

How to Settle Your Debt with Collectors.

I was in a rough spot financially where I felt the payments I was making monthly was doing absolutely nothing and I needed that money for food and bills more. Soon enough I started having 1 or 2 missed payments that turned into 13, 14, 15 missed payments. My credit plummeted, my balances skyrocketed, and now I was being harassed by debt collectors.

At this point, every account besides my car was in collections. I had over $10,000 I owed and after a trip to the hospital for a cooking burn, that total increased by $2,000.

However, I did some research and came up with a plan. First I sat down and looked at my finances and monthly statements. Where was I overspending? How can I make a little extra money? What is the most important thing that needs to be paid? How much can I realistically pay a month to get these balances lowered?

After I came up with a plan I called the creditors of the most important bills (highest balances) to get those taken care of first.  I had already scanned over my monthly bills and my monthly income so I could email it to them as proof while we were on the phone. I explained my situation where years previous I was unaware of the dangers of credit and with my income now there is no way I can pay the entire balance.

I asked if we could settle our bill for X amount in 3 payments auto-debited on this date the next three months. Some agreed right away and others fought tooth and nail. Finally, I told the larger ones who wouldn’t budge that I owed $12,000 in debt while only making $9120 a year after taxes. If no one wanted to settle then at 22 years old I was looking to file Bankruptcy.

With the proof, I provided and dropping the “B” word I was able to get every single account to settle with me. Some of my bills got cut in half while others agreed to stop charging me interest if I could pay off in 6 months. There was a light at the end of the tunnel and I was going to come out breathing again.

It was not an easy call and I can promise you every single one of these creditors will make you feel like the biggest scum on the Earth. And honestly, that is how I felt. I never not wanted to pay my bills in full at all. I just knew this was going to be a lifelong problem if I didn’t take action and do what I could do.

It is important to remember when you settle and pay off debts to have a written record of it all. Recently I was checking my Credit Karma and noticed I had collections for Macy’s. Knowing damn well I paid that off, all I had to do was file a dispute with the paid in full paperwork and Equifax took it off my credit report.

Also- when you are settling with creditors ask them how long after the settlement is paid, will it take for them to remove the collections from your credit report?

Rebuilding My Credit

After all my bills were cleared and paid off (October 2016) it was time for me to rebuild my credit. And what perfect timing since we just got engaged! Chad & I were going to work together to build our credit so when we get married 8 months later we will have had a head start.

For about 5 months the only credit I had was my auto loan through Chase. I made every single payment on time and every month paid an additional $50 to my principle. It wasn’t a lot but it was helping to build trust in my credit and slowly raise it.

Then in April my car just died, there was nothing left of it and now I needed to figure out how to get a new car with no cash and terrible credit. Thank GOODNESS we started building Chad’s credit in October and he was able to cosign on a loan for me. His good but new credit was able to get me a reliable car at a little higher interest rate BUT I could afford the payments and it was a new account on my credit. This meant a brand new creditor opportunity and I swore I wasn’t going to have one missed payment.

A year and a half later we have multiple store cards but are only using 14% of our total credit balance. I have made on time payments for 21 months and every single one of my accounts is in good standing.

I am SO proud of how far I came and never thought I would be where I am today. I am grateful for the HARD lesson in adulthood because I made the mistakes young. These aren’t mistakes I will take with me well into adulthood and now when we have children, I know the importance of educating them HARDCORE on credit/money management early in life.

It is not an easy journey but being educated and learning money management will help you get out alive.

Thanks for reading and I know you can and will do this!!


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