You can’t blame Eddie for feeling like trying to build better credit was a lost cause. In the spring of 2011, he lost his job. When he found another one three months later, he had to take a significant pay cut. He managed to keep paying his mortgage, car payment and utilities on time, but his four credit cards “went into the toilet. That killed my (credit) score,” he wrote in an email. At the end of that horrible year, he found a better-paying job, but by that time, he said, “the damage was done.”
And when he thought things couldn’t get worse, they did. On Jan. 25, 2013, he was in a near-fatal car accident. The other driver was uninsured, and because he didn’t have collision insurance, Eddie had to come up with the difference between what the insurance covered and what he owed on the car, as well as try to buy another car immediately. With his credit in poor shape, he shopped around for a car loan for bad credit, creating “16 inquiries over 15 days.” The only loan he could get was at 17.99%, and the inquiries were another setback for his credit.
When he posted a comment on the Credit.com blog earlier this year, he figured he might as well give up on any hope of rebuilding his credit:
Now that I know my REAL score is 560-ish, it doesn’t matter. I will not get out of this hole before I die. I have one small credit card that I use 10% of and pay to $0 every month, but that is only going to buy me a few points a month. That’s like tossing deck chairs off the Titanic to try and keep it from sinking.
Despite his frustrations with the credit system — including the fact that increasing his income didn’t help his scores, and that his credit scores varied widely from source to source — he kept reading, learning and plugging away. He monitors his free credit scores at Credit.com and other sites, and he tries to make sure the advice he is following is reliable. And his hard work is paying off.
Recently, he emailed me with the following update:
Just wanted to get back with you. When I first contacted you, my scores were 598 across the board. Now, based on my having a Capital One credit card with a $200 limit, using $30 a month and paying it on time (early in fact) down to $0, that card has increased my limit to $500.
Also, the next reporting period after 12 of my inquiries reached one year, my score changed. My last report showed my scores to be 665. I have no need to apply for more credit right now, and I will refrain for another year and see what the combination of another year of positive reporting from Capital One plus more age on the current 4 inquiries does for me.
I don’t know if the 6 months of positive reporting from the credit card or the inquiries aging had more of an effect, but my score jumped 67 points in 3 months, from Jan to March. Those inquiries were 12 months old as of Feb 14th. So many people on the blogs don’t seem to get that even if you get the credit you applied for, it’s still an inquiry. Keep doing what you do! A lot of people benefit from your advice.
So while Eddie hasn’t done anything dramatic — he’s using a credit card with a small limit responsibly and holding off on applying for new credit — he is seeing steady progress in terms of improving his credit scores. His grade for payment history in his Credit.com account is stubbornly stuck at “F,” but he’s earned an A for debt usage, an A- for account mix, a B for credit age, and his grade for inquiries is now “C,” which is up from an “F” two months ago.
He’s starting to see that there is hope.
If you are feeling hopeless about your credit, take action like Eddie did. Get your free annual credit reports. Sign up for a free account with Credit.com to get your credit score along with an action plan for your credit. With the right tools and consistent action, (hopefully) you can feel hopeful again, too!
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