My credit hit rock bottom when I was 26 years old, but by the time I was 30, I was able to purchase my first condo. Ten years later, my credit score is just about perfect. I was able to rebuild my credit fast after going through a period of financial irresponsibility in my early 20s. At that time, I maxed out all of my credit cards. I attended a credit counseling and budgeting class that was offered through my local library.
Getting a copy of my report
My first step after becoming better educated on credit card debt was to get copies of my credit report. I needed to be faced with the reality of exactly how bad my financial situation had become. It was like seeing a report card with a lot of failing grades. I looked at a new copy of my credit report each year. With each passing year, my credit score or FICO score improved.
Negotiating with credit card companies
I found out that my credit card companies would work with me to pay off my debt. In many cases, if I was able to make one lump payment to them, they would take away the built-up interest charges that I owed. I started saving up as much money as I could so I could wipe out each credit card one at a time. I still made the minimum payments on the credit cards that were in good standing.
Developing a positive credit card record
I started to build back up my credit by using two credit cards that I paid off in full every month. I also took out a small car loan. The key was to make sure I never missed a payment. Because I can be forgetful, I had the car payments automatically taken out of my bank account.
Getting on with my life
Instead of obsessing about my credit score, I just started to live my life with my better financial habits. I made a vow to always save at least 10 percent of the money that came through my hands, no matter what. In four years, I had enough cash to put 3 percent down on a new construction condo in Florida.
Working on my debt-to-income ratio
One of the secrets to being approved for a mortgage is having a good debt-to-income ratio. Lenders wanted to make sure I made enough money to be able to pay my other bills and still afford to make my mortgage payment. By eliminating all of my credit card debt, I was able to show I could afford to be a homeowner.
In the past 10 years, I've stayed out of debt by living below my means. Although I sometimes use cash, I don't have a problem with using my one credit card. I only have one credit card yet my credit score is close to 800. I found out about my nearly perfect credit score when refinancing my home recently to 2.75 percent. I no longer believe the myth that a person has to have several credit cards to have a good credit score. I have one credit card, one debit card and no store credit cards. Even though it was depressing to have $50,000 worth of credit card and student loan debt in my 20s, I'm glad I repaired my credit score so I can get the best rates in my 40s.
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- credit score
- credit cards
- credit card debt