Blogging is kind of a terrible job. I mean, don’t get me wrong, I love it! But if you’re like me and you’re a little bit of a no-holding-back kind of person then you just can’t but share some of your dirty laundry with your readers, no matter how embarrassed and horribly self-conscious it will make you feel. This is one of those blog posts. My credit score was horrible when I started, I mean it’s the “I didn’t know credit scores went that low,” kind of bad. I wanted to make mine better so we could do things like get approved to buy a house in the future, and so whenever people like cell phone providers and insurance places checked my credit we wouldn’t have to pay a huge deposit or put things in my husband’s name.
Knowing Where to Start
This isn’t exactly where I started, this was right after I got serious about getting out of debt. Believe it or not, my TransUnion was actually 28 points lower just a few months ago.
Understanding the Factors Behind Your Score
Obviously, bad things are not good and they’re going to hurt you, but one of the things that was not helping my credit score was the low number of accounts I had open. Apparently, having simple finances is a bad thing so I actually ended up opening 2 savings accounts.
One of those accounts is for our taxes, since I’m self-employed I throw a little bit of the money I make into a savings account for taxes so when we go to file we aren’t faced with a tax bill we can’t afford. If we end up having more money than we need there, we’ll use it to make a big debt payment with any refund we’ll get.
The second savings account is our emergency savings. We have a savings we try to keep around $500 in, for car repairs and such, but this savings is one we don’t touch unless someone is dying, we’re starving or we have no drivable vehicle and there is no other option.
Getting Rid of the Negative
Obviously, having accounts in collections is a bad thing, so we are using our debt snowball to pay off the list of small things that I either didn’t know about or forgot about. (How embarrassing is that?) Taking off things that were in collections had the biggest impact by a long shot, which is what I figured would happen. I started with the smaller things and ticked those off my list pretty quickly. If the balance was over $100 I haggled the price down so I usually only paid around half of what I owed, which made the creditors happy and I was definitely happy. I only had one bad experience with a nasty debt collector, but that resolved and it wasn’t too big of a deal.
Some of the larger accounts I setup a payment plan with, the last one ends this August so all we’ll have left is our student debt and the car. Baby steps, baby steps!
Adding Good Things In
Once we were in a little bit more comfortable place financially, we started putting all of our bills in my name. That meant I was getting the credit for having a positive payment history, you can bet that I paid every bill on time! I also started paying on my student loans around the end of the last year, which we had deferred due to our low income to give us a chance to start paying on our other debt before we had another mandatory monthly payment. The deferment didn’t count against us on our credit score, which was nice.
A year later, my score is almost at 600! Each month it increases a little because the age of my credit increases. While it’s still not a stellar score, it’s so much better than it was that I’m happy with our progress.
Mistakes I Made
When I consolidated my student loans to make the payments smaller, I realized too late that that closed my old loan accounts on my credit score. That means that my years of having those accounts didn’t count for anything with my history. Having a short credit history is one of the biggest factors holding my credit back right now, so Im kind of kicking myself. I wish instead of consolidating I had simply lowered the monthly payments according to my income.
I’m still working on my credit score, so I don’t have to worry about the day we will get a mortgage. The biggest thing I’m doing now is paying extra on my student loans, making sure I always pay them on time. We also started paying on my husband’s student loans before his after graduation grace period ended, because we wanted him to have a positive payment history on record. It’s been just about a year since we started and I’m so proud of how far we’ve come. By the end of July we’ll have paid off over $3,000 in debt, including my student loans, medical bills and Ian’s student loans. It has been painful some months, but we’re really excited about the prospect of having no debt and being able to have just a house payment, and eventually not even having one of those!
If you’re going through rehabbing your credit score and getting out of debt, then I highly recommend CreditKarma and Mint.com, both of which are free with no strings attached. CreditKarma monitors your credit score, while Mint.com monitors everything in all of your bank accounts, PayPal and even your loan balances. It’s pretty fantastic. You can also keep track of all of your bills there, so everything is all in one place. It was a huge motivating factor to keep having to see my savings account balances and the debt balances changing in the right direction!