Keke shares how she managed to do the inverse of a debt snowball with her credit score. She had no idea the negative impact it would have going forward. What does it take to repair your reputation with lending institutions? Keke gives us a glimpse into her roller coaster story from home loan rejection to eligibility.
The following is a letter to my children identifying the importance of paying off debt to your keep credit score viable for when you need it.
This page may contain affiliate links, please read our Disclosure for details.
I Let My Credit Score Get Away From Me
Want to know my biggest financial mistake and how I overcame it?
I try to be candid about many things that occurred in my life, with hopes that you will learn from my mistakes. I know it does not always work like that, but all I can do is share and hope that you take something from it.
The Allure of College Credit Cards
One of you has already graduated from College and the other will be heading to University in a few years. I was in that position once and decided to apply for numerous credit cards as soon as I got on campus. This is a mistake that many students make, and I do not want to see that happen to you.
As I sit here thinking about…feels like yesterday. I can see 17 year old me, heading off to college with your grandparents in tow. I got all settled in for my freshman year. Yes, I was 17 once too.
While your grandmother and I walked across campus, there were booths everywhere soliciting for new credit card applicants. I applied for a couple and was instantly approved. I thought that was a big deal. I don’t think the limit was high, probably $500.
Not that it was your grandparent’s responsibility, but we never discussed the consequences of not paying the bill… or even how I was going to pay it. Mind you, they were paying for college and I was only working sporadically during the school year and a bit more during breaks. This was a recipe heading for disaster.
After getting those couple credit cards, I also applied for a $500 line of credit with various department stores. To a college student with very little money, any amount seemed like a lot. All I could think of was…what clothes am I going to buy and which restaurant I’ll indulge in tonight.
If you have not already figured out where I’m going with this, I maxed out my credit cards and had no means to pay them off.
Looking back, I did not understand the importance of good credit. I really did not have any reason to think about it. In addition to college, your grandparents leased my apartment and purchased my car. All I knew was I had “things”. I was truly blessed with parents that started me off in quite a good position. Which I probably took for granted at the time and made me a bit naïve.
I understood I needed to pay the bills on time, but I had no idea the role credit would play in my future. I always thought I’d just deal with the debt later. Little did I know, whatever time I thought I had would creep up on me faster than expected.
Credit Score Spiraling Downward
I had graduated from college and was ready to take on the world. I was confident I could do it. I worked the last year of school and started paying my own bills, even my apartment.
When I moved back to Southern California I was dead set on not going back home to live at your grandparent’s house. I wanted to get my own place. I lived there for a short while to save for a rental. I had no idea I was about to face the credit card debt I had acquired.
I had my eyes set on living in a gated community. As I sat in the leasing office filling out the application, the agent said, “Now, we will run a credit check.” I did not think anything of it. They ran my credit and then questioned the roughly $2,000 debt that appeared.
This is the moment I learned that good credit matters. I should have paid off the debt earlier, but I lucked out as my credit score was not too low…YET. I paid a little higher deposit and had to ask your grandpa to loan me the extra deposit money to move in. Now this debt to my Dad had put me further in the hole.
You would think I had learned my lesson. Now I needed more cash for consumer purchases as my budget was strained with atypical bills… so I went out and got two more credit cards.
At this point, I was about 24 or 25 years old. I had a good job, nice place, fancy car, and my baby was attending one of the best private schools around. I thought I was doing all of the right things, but lifestyle inflation was starting to get ahead of me.
I was not able to pay my credit card bills. I tried for a time, but something was always a higher priority. I paid the rent, car, utilities, nursery school and bought food. The credit cards would have to wait.
Credit Burden Going Forward
I did not know the damage I had actually done until I went to purchase a new car. Lenders were denying my requests for a loan unless I had a cosigner or accepted some ridiculous interest rate.
Your grandparents were my only cosign option. However, I was not going to ask them again. I knew they would say yes, but I wanted to do it on my own…so I opted for the higher interest rate. I didn’t realize how much this would cost me in the end. If only I had consolidated my credit card debt to make it easier to pay them off earlier.
It was like a domino effect. Even the first credit cards balances were still there from years ago. Eventually, it all fell apart and my credit was ruined when my loans were bought for pennies on the dollar by a debt agency.
As soon as I would apply for a loan, everyone I owed money to would start calling me or sending letters. I did not like answering the phone or checking the mail. I can’t tell you how embarrassing and stressful this is.
Resolution to Improve my Credit
Aside from a home purchase, I resolved to never use credit again. If I could not pay cash, I did not need it. I still feel the same today. I have not applied for a credit card in years. I am always telling you both,If you have to borrow, you cannot afford it.Click To Tweet
When I decided to buy a house. I cleared up my debt first. I did not want to be rejected any longer. It was not an extreme amount of debt… so I knew it could be repaired.
I took matters into my own hands and repaired my credit by…
- Contacting the 3 credit bureaus, (TransUnion, Experian, and Equifax)
- Requested copies of each credit report.
- Disputed debt that was seven years or older.
- Used the Debt Snowball method to pay off the smaller amounts first.
Improving my credit score required a lot of organization, tracking, communication, and writing. As the liabilities were removed, my score gradually increased. It took about six to eight months to fully recover and be eligible for a home loan.
In hindsight, I could have managed my money and credit much better. Like many young people, I treated myself to a lifestyle that was not a necessity. I could have eliminated debt, if I was a more thoughtful consumer. The stress and worry certainly kept me up at night.
I wish I had done things differently, but I learned from my mistakes and I hope you will too.
Trust me when I say it is important to pay off your debt and then invest. Please do not make the same mistakes I did.
How have you improved your credit score? Tell us in the comments below.
Keke Dixon is single mother with two children, ages 24 and 13. She has a BA in Mass Communications and Journalism with an emphasis in Public Relations. She manages the lifestyle site “FreeandForMe.org” . Got Milk honored her as a Better Future Mom and one of the most influential influencers.