The credit score. That magic number that gives you access to everything you ever needed (or wanted). You’ll pay more for everything with a bad score and you’ll pay less with a good score. One misstep and a score can be damaged for years, limiting your ability to buy a car, home or even get a job. Many friends I knew were told not to open a credit card because it’s a dangerous way to get in debt. This is true but it needs to be understood that you actually need a loan to establish credit. The best way I can put it is that you need credit to build a credit score so you can get credit. Confused yet?
Luckily, I’ve worked at the credit union for 12 years and have been given the proper education on how to build your score the right way. My wife, wasn’t as lucky. Like millions of others, she had an unpaid medical bill that tanked her credit. The only offers for loans she would get would be predatory in nature with them being well over 20% APR. Her score was hurt so much by this unpaid medical bill she couldn’t even be on the mortgage when we bought a house. With the knowledge I received at the credit union, I was determined to help rebuild her credit score and get her life back on track.
Step 1: Find the old debts and pay them off
The most important step was to find her old, unpaid debts. To do this, we went to annualcreditreport.com and pulled her free credit report. From there we reviewed the report and found the delinquent payments. We discovered there were two delinquent payments; one for an unpaid ambulance bill and the other for an unpaid medical bill. On the report, it gave contact information for each collector. My wife called each collector, paid off the bill and wiped her hands of these delinquent loans.
Step 2: Open up a loan and make consistent payments
Consistent loan payments goes a long way in rebuilding credit. I cannot stress enough, the single, best way to build your credit is to open a small credit card and pay off the entire amount each month. This gives you a consistent payment for your credit score while allowing you to pay no interest. Win-Win! Also, it’s important to have a variety of loans to build a credit score. A car loan is a great next step. I was able to sign as a joint owner on a car loan with my wife and then we made consistent monthly payments to the loan.
Step 3: Be Patient
After 5 years our car loan was paid off. These consistent car loan payments along with consistent credit card payments and no outstanding delinquent loans got my wife’s credit score back on track. She had done it! She had rebuilt her credit. I’m not going to lie, it was a slow process and took years to rebuild. But the truth is no matter how bad your score, you can still build it back. You just need to take that first step.
Hey folks! I’m Danny and I’ve been with Virginia Credit Union for 11 years where I started as a teller at the Short Pump branch. I currently work in VACU’s marketing department as their multimedia and video guy. Being a husband and Dad to two children, I have learned the importance of budgeting and living within my means so I’m excited to share some of my tips and stories with you.
Other stories by Danny S.