So I realized it’s been awhile since I talked about the state of my credit. Partially because it still sucks, but also because I hate the judgment that always follows. Nonetheless, if I’m going to have a blog about getting out of debt, I’ve got to talk about my debt at some point, right?
As it stands right now, I still have ZERO credit card debt. Next month will mark 1 year since I paid off the last one! I’ve had to use credit a few times since I quit my job, but I busted butt until I could pay the balances in full. Still, I have a long way to go before things are where I’d like them to be.
A Snapshot of My Credit
For those of you who are new to the party, this is what’s up with my credit as of right now:
- Chapter 7 bankruptcy in 2006
- About 25 (!) pre-bankruptcy credit cards showing 90+ days late AND included in bankruptcy (thanks to me listening to my attorney, who told me to stop making the payments) – these should start falling off in 2013
- 1 charge-off from a car I wrecked (long story)
- Car loan (I owe $8488)
- Student loans (I owe about $41,000) – these are currently deferred
- $3400 in available credit spread across 5 credit cards – zero balances on all cards (yep, it takes a LONG time before creditors trust you with decent limits again!)
- 100% of post-bankruptcy payments made on time
Yes, it’s ugly, except for those last two. Thanks for noticing! Hence my reluctance to think/talk/post about the situation.
My priority right now is rebuilding the credit I destroyed, which is a long and painful process. I’m focusing on the following:
1. Reducing debt, not adding to it. I rotate use of my cards every few months for a random purchase, usually something like gas, then immediately pay it off. I want to keep my cards active, but not go back to carrying balances that I can’t pay. I also apply for credit line increases every few months (depending on how often the creditor will grant them) because higher limits mean a lower ratio of debt to available credit.
2. Spending only the money I have. I used to be really bad about spending money before I got it. Like if I knew I was supposed to get a check for $100, I would spend $100 ahead of time. Then when I got the $100 (assuming it actually came), I’d spend that, too. Right now I’m saving for a laptop because I need it for work. I know I have enough money coming in to buy it this month, so I could, theoretically, use a credit card and pay it off at the end of the month. But because the money is not actually in my hands, I’m waiting.
3. Keeping an eye on my credit report. You can get a free (actually free) credit report once a year from each of the 3 credit bureaus by going to AnnualCreditReport.com. It’s the ONLY legit place to get it for free, so don’t fall for scams. Anyway, I have my phone set to remind me to get one of the 3 reports every four months. That way I can check for inaccuracies (there are usually a lot after bankruptcy) and make sure there’s nothing weird or fraudulent.
4. Following self-imposed spending rules. If I want something that isn’t necessary and/or costs more than $50, I have to wait 30 days to make sure I really want it. I use a decision tree to determine whether or not to buy something. I only carry one credit card in my wallet. I don’t go to malls or clothing/shoe stores without a darn good reason. Does it seem like overkill? Maybe for some people, but I know myself well enough to know that I need these safeguards.
Right now there really isn’t much progress from when I started this blog in February 2011, other than the fact that my credit cards are paid off and I’ve paid down $4000 of my car loan balance. Don’t ever think that bankruptcy doesn’t hurt your credit, because it OBLITERATES it. I am nearly 7 years out and the oldest negative item will fall off next April. The bankruptcy itself will be there until August 2016.
Despite all that, I still feel somewhat optimistic when I look at where I am. First of all, I’ve finally made real behavioral changes (the type I should have made before filing for Chapter 7) that affect the way I look at spending and debt. Second, I shouldn’t need to use credit anytime soon, so my horrible credit scores aren’t holding me back (knock on wood) and I can use these years to further develop good financial habits. By the time I have decent credit again, I’ll be able to use it wisely. Finally, I know that if I’m ever in this situation in the future, it will be because of some major catastrophe and not because of stupid decisions on my part.
Operation Rebuild Credit status? As good as it can be right now.