I have had a love hate relationship with my finances for a good percentage of my adult life. The other day I was out shopping with my sister, and I said she was so frugal when it came to purchasing something. She said that she got our dad’s frugal genes and I got our mother’s frivolous genes. In the last two years, I have improved my financial situation. My “it’s not cute being in debt” Aha moment really changed my life.
Order Your Credit Report
This is the initial first step to getting out of debt, on top of, increasing your credit score. Everyone is allowed one free copy of their credit report each year from the three credit reporting agency. Those agencies are Transunion, Equifax, and Experian. You can write them a letter requesting they send you one. Include your name, address, reason for wanting one, and a copy of your driver’s license. The license simply proves who you are.
Examine Your Credit Report
Once you receive your report, spend the day literally going through every page. One thing you will notice that the agency will not have consistency in is information. I have NEVER hired a company to help me dispute or do this. I sat down on the ground in my office with a highlighter, sticky tape, and sticky notes. Go through each one separately. Note all of the errors and anything else important pertinent. One thing I noticed on my reports was that certain accounts had been on my credit report too long.
Establish A Game Plan
Once I sat down and saw everything I owed and the errors on my report, I created a 5 year plan. My goal is to be out of debt before the five years are up. Utilizing the 5 year plan versus the aggressive 24 months plan helps me decrease stress and anxiety. You will feel some type of way if you don’t pay off your debt at the accelerated rate. Honestly, I felt like crap listening to those people who paid off $84K in 18 months. Good for them but my life is not set up like that. I used my Debt Plan Tracker set, to write all my debts down and to track everything.
When I was paying off “old” debt I negotiated every penny. Agencies send settlement letters out all the time, don’t go with what they say. I did .25 cents on the dollar. Trust, these people just want money. When I sent letters to debt collectors, I sent them certified mail and kept a folder of with records of everything I was doing. I sat down once a week managing my finances with tools such as, Financial Planner For Small Business Owners.
This one is one of the most important parts in this long process to increasing your credit score. When I first started getting out of debt I had more setbacks than forward leaps. I would get discouraged and mad that I wasn’t accelerating at paying off my debt like my counterparts. My sister and Liz, my banker, were the two people I talked to most about it. They were very encouraging. Also, please note that I treated myself along the way.
Building New Credit
The first month of my plan I applied for a few secure credit cards. I got decline. I was sad when this happened, but looking back it’s pretty funny that my credit was that bad that I couldn’t get a secure credit card. Now, I have two credit cards. One is a secured credit card that I talked about in 5 Ways To Create Better Habits With Money. The other is a Capital One credit card that I received last month. Whats funny, they were “harassing” me for months with mailers for a pre-approved card. I consistently ripped them up. Then one day, I said let me learn more about them and this card. Read nothing but great reviews, so I applied and was approved.
Paying off debt, getting my student loans on track, and establishing new debt helped me go from a 505 credit score to a 710 score.