After a recent post encouraging a low-scoring forum member to be hopeful, several people have asked me how I got my FICO score from 420 in April to the 600s today. Hard work, patience, and diligence, as well as asking many questions on this forum, have been my salvation. Not to say I haven't slipped – I got so excited a few weeks ago when my FICO hit 668, and applied for a CapitalOne Auto Loan and a Best Buy card (it was my birthday), and my score started slipping downward because of those new inquiries. I need to not beat myself up over those decisions, but oh well, you can't change the past.
To set things up, I have had a contentious relationship with credit for the last few years, barely holding onto some subprime credit cards before their unmentionable fees overwhelmed me and led to the cards' closure. I never really relied much on credit cards because I could never qualify for more than $700 on one, although I did get a $1500 Best Buy card a few years ago, which was closed/charged off after I couldn't keep up with payments. I used to have a Dillards, Marshall Fields, and Sears card, but they all got closed due to delinquent pay patterns as well. These were all reporting well, as long as I made minimum payments each month, but I had too many, and the many minimums maxed me out, and I was never making any progress on the principal. Now the only card I have of any kind of revolving credit is my Target card.
I also have moved four times in five years for employment opportunities, and each one dried up almost as soon as I arrived, usually due to downsizing. This constant moving placed my already tenuous financial status into a constant state of disrepair. It also meant that I was leaving a trail of unpaid utility bills in my wake, which eventually got sold to collection agencies. I even had a "pay to stay" rental situation which shows up as an eviction/public judgment from 2003 on my credit reports.
Last summer (like a lot of people), I found myself having to choose between gas and other payments. Unfortunately, gas prices meant I delayed making my car payments. I started to get behind, and once I did, I never recovered. I tried to trade-in my vehicle for another one, but that just resulted in tons of hard pull inquiries that benefited me nothing. Then I ended up refinancing the car, but even the refinanced amount was too high, with gas prices still in the upper $2s, lower $3s, coupled with the fact that I was commuting 60-70 miles a day, 6 days a week, in an SUV that got 21 mpg tops on the highway (oy). Then I had to move to a new apartment (mine was being turned into condos, so there were all the moving expenses and utility deposits due). So nothing was really working in my favor at the moment.
Ultimately, I had gotten myself into a state of mind a couple of years ago in which I just didn't care about my credit, plain and simple. I figured that my situation was so bad, how could it possibly get any worse? That cavalier attitude led me to ignore important deadlines and settlement offers that would have kept things off of my credit report. It also relegated me to nights where the phone wouldn’t stop ringing for hours as creditors and collectors called over and over again. I resigned myself to always having bad credit and never owning a home, which made me bolder (and somewhat stupider) in my own taunts of the creditors that were calling me. I now know that some of this was due to anxiety and depression, but some was just plain stubbornness.
Then in March, my 2003 Ford Escape was repo'd, and I all of a sudden discovered just how important good credit was, when I couldn't even get into a used car for less than $3000-5000 down, and those were subprime loans in which I was paying the bank $2000-3000 to approve the loan, BEFORE the cost of the car. This became the tipping/turning point for me, and it opened my eyes to the seriousness of my situation.
I began monitoring my credit at that point, and was shocked as what I found. I started out around 457 in late March, and after some more attempts to get into a car loan in April, it dropped to the aforementioned 420. I got my FICO Score through the 30-day free trial of ScoreWatch, and then did the same for TrueCredit. I have since subscribed to both of these services, but it was invaluable to have a parallel comparison of all 3 credit report accounts (TrueCredit), as well as the comparison of a FICO score and a FAKO score. As part of ScoreWatch, I became addicted to the FICO Forum, and learned most of what helped me there.
I had let several of my student loans go without applying for deferrals, so they were reporting past due, but thank God not in default yet. There were several erroneous accounts that were not mine, as well as accounts that I had paid, but were showing as still open and unpaid. Far too many collection accounts with unpaid balances.
I called Target and made a payment arrangement with them, just to keep the card open and active, so that it could help me later on if I needed it to, as my sole source of revolving credit and good credit-building power.
The first thing I did was comb through the free credit reports I received (annualcreditreport.com), and mark any accounts I didn’t recognize as mine. Then I found any erroneous late pay notations. I disputed these sets of items right away, and several of these errors disappeared very quickly. Step one should always be getting rid of obvious errors – personal information, addresses you don’t recognize, accounts that don’t belong to you, duplicate reporting, etc.
But I think the most important thing I did to monitor my success was creating an Excel spreadsheet of all of the derogatory items on my credit reports. I had columns for:
• The name of the creditor
• The name of the original creditor (if the account on the report was a collection agency)
• The amount of the debt (even if it was zero – paid off/charge off)
• Date reported
• Expected date it would drop off my credit report (this takes some math and research at times)
• Which credit reporting agencies reported the debt (this was a small detail, but became very important as time went on)
I also made a similar chart that included all of this info for accounts that I had received correspondence about from collection agencies or creditors that had not yet appeared on any credit reports yet – this was to become my reporting prevention list.
These charts allowed me to track what I owed (totally and individually), and monitor when things would start to drop off (and how many). Ultimately, it was a hard look at the reality of my situation. But when I realized that, apart from the student loans – which were now in deferral or the process of being deferred, I only owed $12000 max, it made me realize that this was too low a number to consider bankruptcy.
I made a plan to set aside $100 per week in a savings account to use for credit repair – this amount has taken a bit of a beating because of a settlement with Ford I arranged, but that single settlement (if I paid them 50% of my deficiency amount remaining after the sale of the repo’d vehicle, they would consider it paid in full and remove the repo comments from my credit reports) has actually reduced my total bad credit debt to less than $5000 now! The $100 a week allows me to look at my chart and see what accounts might be paid off completely with $100-300; those accounts I attempt to Pay for Delete – See Tuscani’s sample Pay For Delete (PFD) and Goodwill (GW) letters; they will help you through hell and high water. I did the math, and if I continued my credit repair savings account, it would allow me to pay off between $2000-4000 a year, which meant that after the Ford settlement, I could get all of my bad credit accounts paid to zero (and work out PFD and/or GW plans) within a year and a half. Some sacrifices would have to be made, yes. And the collection agencies don’t like hearing me say this, but I do and I stick with it, “I have drafted a plan to get out of debt by the fall of 2008, and your account is included in that plan, but you’re not the account I am working on at the moment, so you will have to be patient, but you will get your money.”
Part of my plan also involved joining the credit union at my job. Many benefits, not the least of which was automatic overdraft protection for my checking account up to $500. USE WISELY!
I have also created an Excel spreadsheet and chart function that allows me to enter my daily TrueCredit scores as well as my FICO score updates, and it may not seem to be much of an increase daily, but it does continue to go up.
This is more detailed than it should be, and probably not as detailed as it could be, but this has been my journey so far, and hopefully it will be enough of a shock and build enough good fiscal habits that I can keep moving steadily towards fiscal solvency.
Hope this helps.
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Starting Score: 643