If you’re reading this you probably don’t have the best credit. Don’t fear, neither did I. I got my first credit card from Marshall’s at the ripe age of 18, bought a bag of chocolates in the check out line, and forgot about it. That negative ding was the first of countless, and I was slapped in the face by reality when I attempted to get approved for my own car at 21. By the grace of the universe, I was approved for my Nissan Altima. However, because of my 420 credit score, my interest rate was horrendous—a whopping 15.99%. When I calculated the interest I’d be paying throughout the entirety of the loan and realized that I’d be paying the price of a luxury convertible to drive a $12,500 Nissan, I decided that it was time to make a change.
The three most important keywords I’d attribute to my success are Credit Cards, Credit Utilization, and Disputes. I knew I needed to have a credit line to build a positive credit history. I knew I needed to keep my credit utilization—or how much of my available credit I used—low on those cards (***Over time, I learned that each credit card company submits reporting to the credit bureau at different times, so making sure your credit utilization ratio is low ALL OF THE TIME vs. when payment is due is very important. This is super easy to do by simply paying off your credit card every time you use it.). And, lastly, I knew I needed to get as much negative history on my credit reports off as possible.
I needed a credit card in addition to the car loan that was my only line of credit at the time, but all of my old cards had been canceled by either the credit company or myself as preventative spending method. I knew I wouldn’t get approved for a traditional American Express or Discover at this time, so I looked into secured credit cards that a majority of banks in the U.S. offer. Secured credit cards are funded by your own money, but register to the bureaus the same way traditional cards do. I gave Capital One $300 and now had a credit card with a $300 limit. I would use this card for gas only and pay off the balance every month. With every on-time payment of my Capital One Mastercard and my auto loan, my credit score began to increase.
At around the same time, I became an avid creditkarma.com checker (I also used Equifax.com, however, after their security breach I no longer feel comfortable referring them, nor do I use them). I can confirm using sites like CreditKarma do not impact your credit score negatively, as I have used them for many years now without issue. Under the “accounts” tab on your CreditKarma home screen, you will see a list of all of your current and past debtor accounts. When you click on a particular account you will see a “dispute an error button”. Click it!
You will be prompted to select reasons for why you’d like to dispute this particular creditor as an error. My most successful responses were 1. I have no knowledge of this account (I was basically a different person at the time, so this is partially true) and 2. This account is settled (seems like a good outcome, why not select it into existence? Does the law of attraction work for credit scores?). This method worked for one of my outstanding negative “dings”, and my credit score rose yet again.
One year into my credit score journey, I decided to apply for a more serious credit card. God Bless the folks over at Discover, who approved me for what is now called the Discover IT card with a $500 limit (feel free to apply thru this link, if approved you will get a $50 cash back bonus). I was about as excited about the free option to get your initials monogrammed in pink on the front of the card as I was about my credit situation improving. I made it a habit to request a higher credit limit every 3-6 months and was approved each time in $500-$1000 increments. In addition to gaining a higher overall available credit, this also made it much easier to keep my credit utilization low. Consistency is key, and adding my on-time payments to my Discover to my other payments, my credit score continued to rise.
I had read online about how great the points perks of a Chase credit card were. The Chase Sapphire Preferred boasted a 50,000 points bonus (which translated to around $650 in flights on the rewards page of their site). I got approved for $5000 with a score in the high 500’s (I’m aware this is atypical, however, like most people I’m unsure of what algorithms the creditors use since to decide as I know people who’ve had higher scores and have been declined). I think the credit karma gods were on smiling down on me that day. I paid my bills on time, used my card responsibly, requested quarterly balance increases on all of my accounts, and my credit continued to rise. Note that Chase offers the Chase Freedom Unlimited card that approves those with lower credit that comes with a slightly less enticing but still awesome sign-up bonus.
Remember my auto loan I told you about? It was at this time I decided it was mandatory to get that 15.99% loan refinanced. With my much more attractive credit score, it was easy to transfer my auto loan to a credit union at 3.99% interest. At this point, my improved credit was no longer just a number, but an actual solution for saving money.
Oh, AMEX. I always wanted an AMEX. The little girl playing house inside my head wanted an American Express because they boast the chicest credit card design. My new credit-conscious persona wanted one because American Express cards provide some of the best points programs and perks. With a score now in the 600s, I was approved immediately for the Blue Cash Everyday Card from American Express (use this link and get $200 cash back). Note that American Express offers the Amex EveryDay Card which is easier to get approved for (this link will get you 15,000 in bonus points).
At this point, being in the “fair” credit card range (I consider a solid 700 to fall into “good category”) I refinanced my vehicle and got the sporty BMW I’d always wanted at a 3% interest rate. I pay about the same to drive a car I actually adore vs. my old Nissan simply because of a higher credit score. Perhaps not the wisest financial decision in terms of value depreciation, however, I owe it all to my credit (and this isn’t a Penny Hoarder article about frugal money habits).
My credit score currently sits at around 700. I am looking forward to home ownership and achieving more of my personal finance goals. With $30,000 (that I never use) in available credit, it’s very easy to keep my credit utilization low. I continue to request line increases to ensure this number grows and no longer have the need to my dispute button since I monitor my credit like an absolute nutcase. To my fellow shopoholics and/or irresponsible swipers, I’m proof that with some simple changes your bad credit score doesn’t have to haunt you forever.