Hey Reddit--
Just wanted to share how I repaired my credit! I am in my mid 20s with a background in accounting, and am in my last 6 hours of required coursework for graduation. In June will finally have my BBA.
I am from a lower socioeconomic family and will be the first in my family to hold a degree of higher education. This is relevant to because my lack of financial education negatively contributed to my adult decision making. One of which included me totaling my first car (my first financed car with 16.8% interest, when I had no idea how fucking shady used car salesman could be) after defaulting on my full coverage auto insurance. I was 18 & clearly not being responsible with my money. The bank sold my car at auction, and made me responsible for the remaining balance of $6700. Which I completely ignored and did not pay. And I lived without a car for a couple years and went off to college.
The one good thing I can say about financing my education is the fact that I took my basics at community college. When I transferred to a 4 year university from community college, I had >7K in unsubsidized loans. It would take me a couple years to work and save up for a car which I then purchases outright.
Flash forward another 3-4 years.
As of a year ago, my student debt included both subsidized and Unsubsidized loans totaling 42K with interest rates ranging from 3.25-6.5%. At the time, I held a job at $18 an hour (~30-36 hours a week) and had purchased my car outright so my only expenses included rent, utilities, insurance and basic living totaling ~$800 a month. After taxes I was safely taking home $1750.
I also had 6K of medical debt from unexpected hospital visits my first year of college when I had no health insurance.
Last March I was in a car accident that totaled my car. While the market value of my car was about $4500, it was reliable and fuel efficient and I was proud to not have a car payment. My mistake was going from full coverage to liability in January the same year. It sucked so hard.
At the time of my accident, I had (for the very first time in my life) a 6 month savings/safety net and was practicing more responsible spending habits. (I fell victim to the creep a couple years earlier, because spending money felt good and I had never felt that coming from a poor family.) Although my savings were replenished, and my debt was manageable, my credit was still shit. Legit 515, 519, 521.
I was forced into a situation where buying a more reliable car was a must. I was living in a small southern town with little/poor public transit. And was also attending school full time and working.
I had also never owned a credit card at that point. I accrued the cost of a rental while in search of a good deal for a car (which totally fucking sucked.) I purchase membership with all three credit bureaus and got to work.
The 6K medical debt included 4 accounts all sent to collections.
I researched collections agencies and inquired about two of them to ask general questions about their collecting processes and they tried to trick me into giving them my personal information, which I knew better than to share with them. As a result, they were not very helpful. So the first thing I did was file disputes against all accounts to question their validity. from a business perspective, I am aware that acquisitions and medical mergers create admin nightmares that subsequently benefit people like me because documentation can be lost in the shuffle.
It happened to be that December 2015 was the 7th year of the $6700 defaulted car loan mark on my credit. It stayed on my credit simply because I wasn't paying attention. I disputed that first, it was promptly removed and that alone raised my credit score to 630.
I may have been incredibly lucky, but 3 of the 4 medical accounts totaling about $5.8K could not verify my debt (they were no longer owned by the same company or had been written off/sold off) and were removed from my credit report. I paid the remaining account in full and just settled to have that on my credit report. At that time my credit score increased to 680.
I knew that I had no real credit history other than my student debt-- which I have never defaulted on-- and made the scary decision to apply for a credit card. I was certain I would have to settle with a prepaid credit card.
I applied for a credit card with CapitalOne and was approved for a cash back card with $500 limit and 9 month 0%. I cried. Maxed out the card and paid it in full every month. By April 2016 my credit was hovering between 650-680.
I then applied for a car loan with my credit union and was pre-approved for a 16K loan at 6.9%. I also learned from a family friend that my pre-approval could be used to leverage better financing. I took that to Honda and purchased my first brand new car totaling around $22,500 when all said and done. I believe my credit was inferior and insisted on putting down $4500 (almost all my savings) to ensure my approval. I locked in a 3.25% rate with Honda.
By August 2016 CapitalOne increased my credit limit to $2000 without me having to request it. I have never missed any payments and went on to take a better/higher paying job.
In January of 2017 my credit score peaked at 740 and have hovered there since. Last month I was approved for my first American Express cash back rewards card at 0% for 18 months. While the limit is only $1000, I am committed to building a positive relationship with AMEX and will treat this card the same as I have by first credit card.
I have lurked here for a couple years and was finally brave enough to share my story. It was rough at times but ultimately I am so happy I finally faced the music and took action to repair my credit!
Thank you to all of you who take the time to explain and share such helpful financial information with others. This sub and it's contributors have made a very positive impact on my life!! Also-- please excuse the formatting if it comes across disorganized-- This is my first time posting to this sub :)
Submitted April 02, 2017 at 01:41AM by moves_like_jagerrr http://ift.tt/2ooTk3k
