It was in the spring of 2003 that I realized that I had issues with my credit. In my twenties, I spent frivolously when I discovered that I could buy whatever I wanted by opening up a line of credit and charging it. What I did not understand was when I chose to do this was that I was going to have to pay a finance charge for having this money upfront. Yes, I was naive enough to actually believe they were giving me the money in advance at no cost.
At the time I began to open up lines of credit, I'm sure my credit was most healthy. I did not know what the score was, but I can only imagine it was strong, because I had college tuition loans paid in full and car loans paid off, both thanks to my generous parents.
When I began working, I had no good understanding of money. I spent money on whatever I wanted and when it ran out, I stopped spending until next pay day. Sometimes I would go a few days with just pennies in my account. Other times I would go 10 days with just $10. I had no concept.
And then it happened. I was standing at the Victoria’s Secret counter, and my card was declined. I could not buy the tango black lace panties and matching bra that I desired so badly. I had not opened up a single piece of mail that had been sent to my home when I started to receive the bills. My subconscious obviously working overtime in avoiding the inevitable because it was so much fun to eat out, drink out, be dressed to perfection with all the accessories, have a gym membership, a fab condo and all the furnishings to boot.
I still remember to this day, that feeling of embarrassment standing at that counter. I drove home, crying, knowing full well that I put myself in this situation and needed to get myself out.
I went home, pulled out the mail and opened every last single statement and jotted down the numbers on a piece of paper and added them up on the calculator on my cell phone. The number was astounding. It was not what I expected.
So then I began to research. Online, at the library, asking friends and family. How did credit work? How could I fix this? I learned about finance charges, revolving balance, credit limit, minimum payments, non revolving credit, APR, debt to income ratio, and FICO score among many other terms. I also learned of Experian, Equifax and Trans Union.
It took about five days for me to get the courage up to order my credit report and FICO score, and because I intended to fix my situation, I ordered a credit report and FICO score from all three agencies.
It took me a couple of days to filter through all the credit reports. My credit score ranged from 580-610 depending on the agency. My debt was deeper than what I was earning in a year.
That realization motivated me in ways that today I am grateful for it. I understood that value of working hard to earn money, the value of negotiating my worth to an employer, and the value of earning the things I had thought I was just deserved.
One by one I paid off those bills. Meticulously accounting for 3 years, each penny spent, each dollar earned. Sometimes Id fall off the bandwagon. I found I could restrain myself, just not as much as Id hoped. Rather than spending $1000 at Vickie's, I stopped at Starbucks more than once a week which was a violation of my self discipline. I would remind myself that this was an improvement not a failure to not be too hard on myself.
It has been over two years now that I have been debt free, aside, of course, from my mortgage which provides me a bit of tax relief. I have established a solid credit foundation by selecting a few reputable creditors, making purchases and them paying them off entirely. About mid way through my credit repair project, I pulled all credit reports again…my way to self motivate to achieving the credit I desired.
In these hard economic times, I encourage you to take advantage of the relief that the government is providing to improve your financial situation in a responsible way. Take fiscal responsibility for yourself and do not be a menace to society by overextending, or taking an adjustable mortgage rate that you know full well you will be unable to pay in the future…only to place these poor choices as tax burdens on others.
Use this time as an opportunity to wipe your slate clean and enjoy the freedom of life without the pressure of, “Can me or my family make it to next pay?” We may not all agree that the stimulus package is the right solution, but its here whether we like it or not.
From someone who has experienced debt and poor credit herself, I can promise you, the journey to debt and credit recovery will me humbling and rewarding. It’s empowering to know you can borrow, when absolutely necessary, get the most competitive rates and have no fear about the process.
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2 comments:
Your post couldn't come at a better time, considering the economic climate out there. People need to be aware of their credit and take measures to ensure that they don't become over-extended.
I have counseled several couples over the years on how to raise their credit. And exactly how you described it is how I described it to them. It isn't rocket science - you just need to focus.
In one case, it took 26 letters to various creditors and one year of making on-time payments, and this woman saw a similar jump in her credit. Creditors will work with you if you communicate with them. But like you said, deciding to make those calls is harder than it sounds.
Every girl I know adores Victoria Secret.
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