My financial journey from a credit score of 590 to 790 took a while to accomplish. During the entire process, I had to teach myself which resources to use based on where I was financially at the time. Unfortunately, I did not have the ability to ask my parents for advice partly because they were the reason why my score was so low at 27 years old.
Up until that point in my life, I was very passive with my financial health and was never intentionally with how I impacted my credit score. While I was living with coworkers employed at a direct marketing firm in Orange County and other parts of the valley, I was never really home living with my parents. Not having any other source of income except their own, my parents asked if they could use my credit cards if they ever needed help making monthly ends meet.
Judging by the title of this post, you probably have an idea of what happened to my credit score. After being away from home for over a year, I got fired from my marketing job and ended up moving back home only to find a grand total of $22,000 of debt spread across 5 credit cards. It might not sound like a lot to most people. But for me at that point in my life living home unemployed, it felt like the end of the world.
I knew it was time to rebuild myself and finally pursue something I loved to do. When I began reflecting on what jobs I had from my past, the best experiences I remembered were jobs I had while working at UC Santa Barbara as a student worker. I never really knew that people could make a living working on a college campus. I decided to look for jobs in higher education only to realize that most entry-level jobs required a master’s in counseling or higher education administration. That was the point I knew it was time to go back to school.
But how was I even considering more potential school loans when I had a credit score of 590 and no current income. Graduate school for my future was what pushed me to start taking care of my financial health. Especially if I had to potentially qualify for more loans to pursue my career path.
Not every reader is going to relate to grad school being the waking moment that pushes them to regain control of their credit score and money, but we can all agree that major events for individuals are what generally push individuals to start their path to a healthier credit score. For some people, it can be their first car purchase. For others, it can be a significant partner or a big-ticket purchase goal like a home. Regardless of what reason you had for finding this post, here are the six things that I used to raise my credit score by 200 points.
1. Credit Karma or any free credit monitoring service.
This was the hardest part for me. Mainly because I refused to believe this app was free. I knew there had to be some catch. There was no way I was going to afford paying for more services when I already owed $22,000. But I saw one of my family members use the app during a family function and asked how much they paid for using the service. They said it was free, just like the commercials I saw on T.V.
So I finally downloaded the app and got familiar with the platform.
You don’t have to use the same app as I did, but the first step to raising your credit score is knowing where your score currently stands. If anyone has used this app or any other app like it, you get recommendations on actions you can take to help boost your credit score.
Opening the app for the first time was probably the most heartbreaking feeling I had experienced during my journey to 790. It was around September 2014 when I downloaded the app and read my first suggestion for improving my credit score. BANKRUPTCY was my top suggestion. I knew there was no way I was going that route at 27, so I decided to read my second and third suggestions. The remaining recommendations advised me to begin paying back my credit card debts.
2. Get the right book for where you are financially.
Sounds simple right? The reason why I had to make this a point is because no one book or website is going to give you every resource that you need as your financial journey continues to grow over the years. You want to pick a resource that is most relevant to where you currently are with your credit score. For me, I decided to use Dave Ramsey’s The Total Money Makeover. You don’t have to use the same resource or author that I did, but Dave Ramey’s podcast was recommended by multiple people I ask and I loved reading for pleasure. So I decided on that particular book.
The Total Money Makeover walks individuals through 7 Baby Steps to financial freedom. My journey slowed down the most during the second step aimed at paying down debt. The book promoted a debt snowball effect to paying your cards. Other online resources I found recommended a debt avalanche approach. Frankly, I don’t care which one you use. Just get started. Take accountability for where you are with your credit score and pick your action plan.
3. Annual Credit Report
At a certain point, you’re going to want to research your credit report in detail. You really don’t need to do this often. But since I was just starting out taking responsibility for my credit score, I needed to see everything impacting my score. So I decided to log onto the one website available for consumers. Every year, you can log onto this website and request a full credit report from all three credit bureaus (TransUnion, Equifax, and Experian). Your score will not be on this report, but you can see all the different factors that are impacting your score. Then you can use whichever free credit monitory app to learn more about how to raise your score by focusing on specific areas of your report.
https://www.annualcreditreport.com/index.action
4. National Student Loan Data System (NSLDS)
Another great tool I have used and have recommended for other returning students who want to go back to school is the National Student loan Data System. This federal tool lists all the loans an individual has linked back to their social security number. I came across this tool while helping many returning students repair relationships with old creditors from previous school loans. The database shows all the different loans a person is responsible for, who the provider is, their local customer service number, the interest rates for each of the loans, and whether you have exhausted all of your federal pell grant. If you are considering going back to school at a community college for an associates degree, a local undergraduate institution or graduate school, this tool will help illustrate all your current school loans. The login credentials for this site is the same as a Free Application For Federal Student Aid (FAFSA). So if you have ever applied for financial aid through FAFSA, you already have an account through the NSLDS.
Get creative with balance transfers
https://nsldsfap.ed.gov/nslds_FAP/
5. Track your progress using a net income calculator
Regardless of what methods you prefer using as a tracking tool, find a way to illustrate where you currently are with your net worth and update that number as you continue to pay down your current debt. I have always been an excel type of person with data and numbers. I tracked my own due dates, how much money I paid each pay cycle, and updated the remaining balances all on one sheet. You may not prefer to use similar methods. For some, a vision board or vision wall where you can draw how much debt you’ve paid down may work better. There is no right or wrong way so long as it works for you. The only wrong method is not tracking your monthly progress. As I continued to read more books on finance, I eventually came across this net income calculator after ready Chris Hogan’s book Everyday Millionaires. The book came with a net income calculator tool I used to get a better scope of how to calculate my overall net worth.
https://www.chrishogan360.com/net-worth-calculator
Helpful links
- https://www.daveramsey.com/blog/the-number-one-way-credit-score
- https://bettermoneyhabits.bankofamerica.com/en
Conclusion
Everyone’s path to raising their credit score is unique to them. The amount of debt and where each person starts is different based on their experiences. But the tools explained above will help each of you along your way. The most important thing for me was to take responsibility for where I was financially and acknowledge that I was part of the problem. Not knowing how my parents were using my credit while I was away was irrelevant. I could have made better efforts to track my credit score a long time ago before it fell below 600.
Once I realized that the problem was there because of me and only me, I eventually believed the solution was up to me as well. I became the problem and the solution. If you come across any other tools not expressed in this post and want to share them, please comment on the blog so that more people can raise their credit scores.