Fix Your Credit Score With Free Credit Reports And Secured Credit Cards
Here are a few rebuilding tips that helped fix my credit.
Get a few secured credit cards and be sure to always make your payments on time. I wouldn’t do more than 3, maybe 4 to start.
Fix Past Issues:
When negotiating with collectors, always request that they remove the derogatory mark from your credit report before you send money to them. Even if you have to agree to pay in full instead of negotiating the amount down, do it. Your credit score will thank you for it in the future.
If there are any inquiries or missed payments on your report that you feel don’t belong there, reach out to the company and credit bureaus to dispute it.
If you have a friend of family member who is willing to add you as an additional signer on one of their cards, do it. Keep in mind that Amex (and possibly other cards) will report it as a new account even if the account has been open for 10+ years.
If you have a few established credit cards, call your credit card company and, if it will not show as a hard inquiry on your credit report, ask them to increase your available balance. You will be surprised at how many might say yes. This can boost your available balance substantially.
Be sure to pay your bills on time and, if you’re carrying a balance, pay as much of you bill as you can afford.
Don’t close old accounts unless absolutely necessary as that will lower you overall credit history.
If you’re struggling with a low credit score, I hope that my story gives you hope. Believe me, you are not alone and there is a way to fix and rebuild your credit.
Back when I was 19, I had inherited a large sum of money from a family member. This led me to believe that money comes easy and, even worse, that it was dispensable. I had no appreciation for the value of a hard days work and no comprehension of saving for adulthood. With this mentality, I had managed to rack up almost $50k in credit card debt within one year. My mom, being the angel that she is, had agreed to pay down my debt in order to attempt to salvage my financial future. By the end of the following year, I had managed to, once again, max out the limit on a number of cards. I started falling behind on payments and, before I knew it, my accounts were closed and sent to collections.
I went through the next few years working odd jobs and barely making ends meet. I never considered that I would actually need credit at some point. Fast forward 3 years, I realized that what I had done was now affecting me. Not only was I unable to lease a car under my name, they actually refused to add me as an additional signer with a top-tier co-signer. I was unable to get approved for a credit card and I was also unable to get a cell phone plan without putting down a hefty deposit. At this point, I felt the need to do something about my credit but was unsure what the next move should be. I had friends telling me to declare bankruptcy but that word frightened me so I quickly dismissed their recommendation. I also looked into credit loans & debt consolidation but, for me, those didn’t seem like the right options. Lastly, I also looked into and actually briefly signed up with a credit repair company but they seemed more interested in my $100/month payment more than trying to help me fix my credit rating.
Looking for a solution
With a credit score in the low 500’s I decided to do some research. I
found that, with a deposit, you can get “secured” credit cards from
some of the major credit card companies that actually report to the 3
major credit bureaus (Experian, Transunion & Equifax). I managed to
put together a few hundred dollars and I applied to three different
cards within a few weeks. I first got a card called First Progress. They gave me a credit line of $300. Over the next couple weeks, I took any extra money I had and applied for the Capital One & Credit One Bank secured cards. Within the next year, I received offers and signed up for two additional cards; the Blaze Mastercard and the First Savings Mastercard. I also had a Paypal Credit account that I was paying regularly.
These cards were the best options for me at the time but there are many others available. I know that Bank of America, U.S. Bank, Wells Fargo & even Harley Davidson/U.S. Bank have secured cards available. I don’t want to go into too much detail but each has it’s upside and downside. Some have $0 annual fee while others have lower APR. The only card I would recommend against is the previously-mentioned First Progress. They would only give a credit line as high as the deposit, they have high APR and their website is living 15 years in the past. In order to make a payment, you actually have to set them up as under bill-pay in your bank account or western union them the money. For me, it just wasn’t worth the headache so I closed that card about a year ago.
For the first 18 months since getting my first secured card, it
seemed like my credit was getting better but it was taking forever to
gain just a few points. I was hovering around the 630-650 range. I
decided to try to tackle the few collections that were left on my credit
report. I had one from T-Mobile and one that was a medical bill. Both
had been in collections for at least 3-4 years. I called the collection
company that owned my account and began a 3-week long negotiation. While
the total bill was just over $500 and could have been paid down over a
few months, I wanted to have it removed from my report as soon as
possible. We ended up settling for around $300 and I paid it. The next
month, when it was reported to the credit bureaus, I found out that it
was not actually going to be removed from my report but it was going to
remain as a collection account that was now marked “Collection – Paid
for less than the total amount”. When I found this out, I was at a loss.
I reached out to the company again and asked for it to be removed
completely. They responded saying that they cannot remove it and it will
remain on my report until 2017 (7 years after it was initially
reported). Over a 6 month period, I must have called them 10-15 times
asking them to remove it even offered to pay the remaining balance. They
denied my requests. I then reached out to Transunion and Equifax but no
such luck. Until today, this is still listed on my report but, given
that it’s almost 6 years old, it doesn’t seem to affect my overall
credit rating too much. Learning from this, I reached out to the other
collection company and let them know that I was willing to pay the
account down over two months but they had to guarantee that it would be
removed from my report. I followed through with my end and they did as
well. It was completely removed from my credit report. Finally! Success!
My first big win
This was about a year ago. At 31 years old, it seemed as though I was finally making headway. I could finally see the light at the end of the dark tunnel. Feeling like a responsible adult, I applied for a lease for a car under my name. This would not only be the first car I would lease under my name but the first car in the last 3 lease terms that I was even allowed to be a signer on. Knowing my previous lease was nearly up, I started looking for a car within my budget. I had my eye on the Lexus IS250 but, after running my credit, they told me I was not qualified and I would need a co-signer. I was let down but at least they would allow me to be on the lease this time. I went back to the dealership and told them that, if I would need a co-signer, they would need to give me the car for $0 down and a ridiculously low monthly payment. To give you an idea, it was $40 less per month than I was paying for the lease on my Honda Accord. They nearly laughed me out of their office. I negotiated with them for about 2 weeks and, just when I was about to give up, I received a call from the manager saying he would do it. He would give me the car I wanted at the price I wanted and do so WITHOUT A CO-SIGNER! I drove off the dealership lot in my new car 3 hours after that call. It was the first major win since I started rebuilding my credit. I finally began feeling a like a responsible adult. Little did I know, when you take out a loan/lease on a new car, it does damage to your credit for a short while. My credit was now back to 576.
I continued making my monthly payments and obsessively keeping an eye on all of my accounts. My credit slowly started inching back up. I was at 597, then 614, then 669. For about 8 months, my credit hovered between 626 and 689. I just couldn’t break the 700 mark. I began researching what I can do to get my credit to go just a bit higher. I learned that the balances I carried from month to month were worth nearly 30% of my total credit score. I then made arrangements to borrow the money to pay them all down. I agreed to have the loan paid back within two months and I should be fully paid back in 2 weeks from today. Another thing I noticed was that overall credit utilization played a role as well. I figured that if I can somehow get higher ‘available credit’, this would bring my overall utilization down. I asked a friend of mine if he can add me to one of his ‘high-available balance’ cards and he happily agreed. I also called all of my credit card companies and, when assured that it would not be a hard inquiry, I asked for a balance increase. Of the 5 cards I requested with, all of them doubled or tripled my previous available balance.
For a few months, it seemed like I was just going to have to accept that I would never be above 700. I would regularly keep an eye on my credit from week to week using my favorite free credit reporting site: Creditkarma.com. I highly highly recommend signing up for an account with them. One week last month, my credit somehow jumped 60 points. Then, the next week it jumped another 46 points. I have been pouring through my reports trying to figure out what had changed and I can’t find anything other than the fact that all of my cards have now reported as near $0 balances. My credit score has now been at 787 for nearly two months. If you’re carrying a balance month to month, I highly recommend paying those down. If you’re interested in playing the balance transfer game and moving balances from one card to the next to show $0 as your ending statement, that might be a quick way to do it as well. The thing is, most credit cards charge 3% to transfer you balances so be prepared for that.
Where I currently stand
In the last year, I have applied to and been approved for the Discover it. These were my first “real” credit cards in over 10 years. I was ecstatic. Over the years, I had heard friends talking about using miles and points to get free plane tickets, free upgrades & cheap or free hotel stays. I always felt less than because I never thought I would be able to get to that point myself. I have since become a gold status member of the AAdvantage program, flown first class for free on 5 U.S. Airways flights, received cheap first class upgrades on AA flights and got a ton of cash back from my Discover it card. My next big move will be to attempt to get a mortgage so I can become a homeowner.
I hope that my experience has been helpful. If there are any updates, I will be sure to let you know. Also, if you’d like to share your experience or if you have any questions or comments, please comment below or send me a message.