Watching my mother struggle with finances as a single mom caused me to never want to fall victim to the credit game. I watched from my childhood years to my teenage years the poor management of funds in my household and knew that I would never be in that situation and would be financially free. Fast forward to my junior year of college and that fear of the credit game became my reality.
It all started when my New Yorker mass transit self, realized I lived in the south where the transit system is not that great, and a car was needed. I explored some options and decided to work with Bank of America. While there, as a first time customer they did the usual credit scan and suggested that I get a credit card to start to build my credit profile. Hmm, that seemed weird to me at the time, but I was in a financial bind and my family wasn’t in a financial position to help me nor were they in a credit worthy situation either so I went with it.
A few weeks later, I received a credit card in the mail with a $1,000 limit. WHAT KIND OF CAR COULD I GET WITH A MEASILY 1000 dollars?! I ended up not getting a car that year or the following year for that matter. Three years later, my best friend’s dad would eventually buy us a car to share, but the credit damage was already done. Seeing how easy it was to get a credit card, I continued playing the credit game. I needed a new computer and professional clothing for my internships so I applied for more credit cards; my WORST MISTAKE EVER. By the way, I only had a little part time job at Spelman College (the school I attended) and depended on my refund check to pay these credit card bills, my rent and other bills. I was knee deep in the credit game!
By the time graduation came, my $1000 credit card for Bank of America ended up with a balance of $2,200, my $1,300 HP computer credit card, $3,000 and my Gap credit card with a $700 limit had a balance of $1,600. Balances, interests and late payments accrued all because I did not understand the importance of making monthly and on time payments. It also helps to have money to actually take care of these expenses. However, that wasn’t it . . . all of the late payments, cards being sold off and the harassment from debt collectors became mentally draining and took away my peace. I became a slave and loser in this credit game. The great thing about losing something so many times is eventually you figure out how to win at it. In 2013, I took a stance to not only learn this credit game, but be the top winner. After years of research, I’ve compiled 7 quick tips to win the credit game.
Latriecia’s Quick Tips to Win the Credit Game
- Get a secured credit card (if you have no credit history)
- Diversify your credit: Use 2-3 different forms of credit (car loan, credit card, mortgage, etc)
- Make on-time payments
- Pay at least the minimum payment each month (but aim to pay a little more)
- Monitor your credit monthly
- Use only 25-30 percent of your available credit: if you use more, pay it off within 20-25 days before your credit score is generated for the month.
- Know the date when your credit will be generated: This will ensure you have submitted credit card payments in enough time to clear or decrease your balances on your cards.
How I Found Freedom
In order to repair the damage I did to my credit in 2007, I had to add good credit to my file. I started the process by requesting a copy of my credit report to see what derogatory items were listed. Then, I paid off smaller accounts and settled larger accounts. Although, I paid the credit cards off, since they were sold/charged off, the negative reporting remains on your credit report for 7 years. Therefore, I wrote letters, called the three credit agencies and begged for the negative factors to be removed from my credit file.
After I handled the bad debt, it was time to add the good stuff! I found a secured credit card. The limit was small, but this point in the process was all about taking baby steps. I maintained on time monthly payments with this card and I only used 25-30 percent of the available credit. I signed up for MyFico credit monitoring so I can see how my score was improving. Also with MyFico you can identify the date that the credit agencies will run your credit to give you a score which occurs monthly. Within a 20-25 day window you need to try your best to pay off any charges you may have accumulated within that month, so when your credit is ran it will show on time payments and a high available credit and low credit balance.
I remained disciplined and patient in the credit game and I am happy to say that my credit is in good shape! I can’t wait to break that 800 score and you can do it to!
MissCFO Takeaway: It takes a long time to build up your credit and a simple swipe to ruin it!
MissCFO Actionable Step: When was the last time you looked at your credit report? Visit one of the free sites such as Free Credit Report and request your credit report from all of the three bureaus.