From an early age my parents stressed the importance of going to college, but ironically they never contrived a plan on how my siblings and I were to afford our Socratic endeavors. So like many Americans in pursuit of higher learning and earnings, I indentured myself to Fannie Mae.
The financial aid awarded to me wasn’t enough — writing bad checks to buy books became a by-any-means-necessary reality. When the monies saved up from my summer job weren’t enough, maxing out credit cards to pay tuition was naturally the next step I gravitated towards; representatives from credit card companies were stationed all over campus offering coupons for free pizza for every completed application — getting into debt was just too easy. At the expense of my financial health, with a lot of determination and sacrifice I graduated from Western Michigan University on the Dean’s List with a bachelor’s degree in English and a doctorate in debt.
Having bad credit was a drag on my self-confidence. But as long as I did nothing, nothing was going to change. So what my parents didn’t educate me in the arts of managing credit, as an adult no longer did I have the luxury of blaming them. Once I stopped feeling bad for myself and honestly addressed what behaviors needed to be done away with, everything changed for the better.
With my credit score currently on track to break the 700’s by the year’s end, I can say with confidence that bad credit isn’t forever. In hindsight I wish I took action sooner! With that being said, I feel obligated to share what I’ve learned on the road to financial rehabilitation.
Know Your Credit Score
Avoiding the white elephant in the room doesn’t negate its existence. If you want to improve your credit you’ve got to know where you stand. I highly recommend creating a profile on CreditKarma.com — it’s free and updates every five days or so with your Transunion and Equifax scores.
Pay Down Your Debt
Once you’ve accessed your credit reports you’ll be able to see all of the outstanding delinquencies you currently have. From there I highly recommend reaching out to collection agencies to see if a deal can be made. Often time’s collection agencies are willing to negotiate and reduce the balance owed in order to satisfy the debt. They’ll even go as far as removing the negative mark from your credit reports. If this is the case, be sure to get it in writing: simply satisfying a debt doesn’t guarantee that the blemish will be removed. If a collection agency is unwilling to have the negative report removed, don’t fret — all reported delinquencies fall off your credit reports after seven years.
Get a Credit Card
In order to build credit you must use credit. If you don’t currently qualify for an unsecured credit card, I highly recommend applying for one that is secured. Not only will you increase your odds of being approved because a cash deposit is required as collateral, you will also put yourself on the path to obtaining an unsecured card. Typically after 6 to 12 months of on-time payments, credit card companies are known for converting secured cards to unsecured cards with higher credit limits.
Using Your Credit Card
Once you have a credit card, don’t be afraid to use it. Borrowing responsibly and making the minimum payment on time shows credit card companies that your worthy of more risk. But there is one catch — ideally it is best not to use more than 30% of your available credit. Credit utilization plays a pretty big factor in regards to your score; maxing out a credit line indicates that you’re a risk and greatly reduces your credit worthiness.
Pay Your Credit Card Bills on Time
Building a great credit score takes consistency. Taking an invested interest in paying your bills on time is pivotal. And by all means, if you have the ability to pay more than the minimum, please do! Though credit card companies only report missed payments that are more than 30 days delinquent, don’t risk it. I repeat, pay your bills on time!
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Fearing the worst, for years I avoided knowing what my credit score was. Now I find myself checking my reports for accuracy every couple days. There used to be a time when I applied for damn near every offer provided. Today, I throw out “pre-approvals” left and right. Practicing the same behavior begets the same results. Good credit is attainable! Your score can be changed, but first the change must start with you.