Hey everyone! Today I am sharing my experiences in learning about credit, the mistakes I made when I was younger and the journey in raising my credit score. Let’s face it, adulting can be rough and we all wish we could go back to the days when we didn’t have bills and responsibilities. But fast forward twenty plus years and here I am. I wish that I knew the importance of credit when I was younger but unfortunately I had to learn the hard way. As an adult, I regret the financial decisions that I made back then but there’s nothing I can do but learn from those mistakes and make smarter decisions in the future.
Sh*t is about to get real so here we go…
The year was 1996! I had no idea what the term credit actually meant nevermind understanding the responsibility that came along with it but there I was at 19 years old with two credit cards. The only thing that came to mind was the obvious.. Let’s go Shopping! I thought I was grown when I went to the mall with my friends and would whip out the plastic card from my wallet. The worst part is that sometimes I would buy things for no reason simply because I could.
The adrenaline didn’t last for long because I received the first bill about a month later. I almost passed out when I saw the amount next to the words payment due and the due date right next to it. Reality set in quickly and the only thing that came to mind was “what in the actual hell did I get myself into”. I paid the minimum payments but that didn’t stop me from using them again and again and so on. The end result for this first lesson was that these two credit cards were never paid off and remained on my credit report for seven to ten years to be exact.
My first adult purchase – 1996
I saved some money for a down payment on my first car. It was a 1995 Honda Civic hatchback. My grandfather leased it and put me on the agreement as a secondary owner. I worked two jobs for almost a year so that I could pay the monthly payments and car insurance. I moved back to Connecticut in the middle of 1997, got a job immediately but eventually I had to call Honda and tell them that I could no longer afford the car. About a week later, they towed it away. It was heartbreaking to say the least but I knew it was the right thing to do. I worked several part-time jobs to be able to save money for a new car. My uncle took me to work in the morning and I took two buses everyday to get to my second job. Sadly, I was only able to save enough for a 1991 Nissan Sentra. It is what it is.
Fast forward to 2001
I had a good job and had my son Manny. I was making more money so the credit card offers were coming in the mail. By this point, I understood more about what credit was, why I needed it, why I didn’t and more importantly the damage it could do to my overall financial situation. I was approved for three small credit cards with balances ranging from three hundred to one thousand dollars. I told myself that I would only use them for emergencies but then again that’s what everyone says. Am I right?
Yeahh…nope! I started using them periodically for pampers, formula, etc. but that led to shopping for clothes and sneakers for both my son and myself. The minimum payments were manageable and I was doing okay for almost a year but then I realized that I was spending much more than I should. I shredded one of the cards and paid the lowest balance in full first. I was so proud of myself that is until I realized that I made a huge mistake by closing the account too quickly. I learned years later, that was the wrong thing to do.
At the start of 2003, I was unexpectedly laid off from my job. Naturally I needed to prioritize my finances so I shredded the last two cards and just focused on paying them off and I added a few extra dollars to every payment. It definitely took a while but I created a spreadsheet and kept track of every payment I made going forward. I was so proud of myself when I saw the balances going down. After I made the final payment on each card, I contacted the lender immediately and requested that they send me an official letter stating that the account was paid in full. I still have a few of those letters put away in a bin. Thankfully three months later, I found another full-time job with benefits so I started moving forward with my other goals.
Somewhere around this time, I realized that it was time to get a newer and more reliable car so I financed a 1998 Toyota Corolla. Unfortunately due to my credit, my interest rate was more than 10% but the monthly payments were manageable. I kept the car for several years until I traded it in for a 2008 Corolla. By this time, my interest rate was slightly better but the payments were still within my budget.
Fast forward – 2007
I decided to buy a condo that I was renting from my mother. I didn’t know what my credit score was but I knew it had to be incredibly low. Truthfully, I didn’t think that I would get approved for a mortgage. A few days after I applied, I found out that I was approved and before I knew it, I was signing the paperwork and was given officially given the keys (LOL they were my keys but now they had a different meaning). I was a homeowner at 31 years old! I was so proud of myself yet in the back of my mind, I knew that if my credit score was higher, my interest rate would have been significantly lower. Within a year or two, I was able to pay off the credit cards. I knew that it was best for me to stay away from them until I was in a much better position financially. Approximately two to three years later, I remodified my mortgage which substantially lowered the interest rate which in turned lowered my monthly payment for the next five years.
Present day – 2018
I sold my condo in the summer of 2012 (long story) and I have been renting a house ever since. I may buy a house before the year is over if not maybe next year. In February of last year, I traded in my corolla for something that I have been wanting for a very long time. After not having a car payment for almost three years, I was nervous about getting myself into another one. When the salesman informed me that my credit score was within Tier 1 (700+), I almost fell out of my chair. It meant that all of my hard work had paid off and as tough as it was, it was worth it just to hear that.
I will admit that within the last five years, I have acquired a few credit cards again (yes I know!) but I have since shredded them all and I am now on the path to paying them off. As I said, adulting is rough and sometimes you learn from your mistakes, and sometimes you don’t. The one thing that I am certain of is that I will make sure that I talk to my son about the importance of credit. I will teach him to be responsible with his own money. He has to learn the difference between wanting and actually needing something and that the theory of “treat yourself” also comes at a cost.
With that said…
If you are still reading this post, THANK YOU! Most importantly, I wanted to share some tips to help you stay focused on your financial journey. Whether you need to pay off your credit cards, save money or just learn to properly budget your finances, it will be an adjustment and it will take some time to get used to. We all have to sacrifice something in order to maintain some self-discipline but it can be done.
- Start by taking some time to thoroughly look at your bank transactions for the last few months. I can bet that you will find a couple of things that you could do without and/or items that you should spend less for. Many of us are guilty of impulse spending or splurging on things simply because we think we need them when in reality we really don’t.
- Of course I am going to recommend that you try using a planner to keep track of your everyday spending. *It doesn’t have to be a fancy one, heck a simple one subject notebook will work just fine.
- Check your bank account balance everyday. Unfortunately we live in a world where identity theft happens therefore just take a few minutes to check your most recent transactions to make sure everything is the way it should be.
- Start a mini No Spend and see how long you can go without spending money on specific things. *Don’t know what a No Spend is? No worries, click here and here to check out my last posts which will explain in more detail.
- Sign up for a credit monitoring service even if it’s only for one month. Take the opportunity to check your credit score, review everything listed to make sure it is all accurate and print a copy for your records. If you find something that does not look familiar or is inaccurate, look into their dispute procedures so that you can start the process to get your credit report corrected.
- Hide your credit cards, give them to someone you trust to hold onto them for you or just shred them like I did. *Now that I don’t have them, I think twice before I spend money on anything now.
- If you wish to consolidate your credit cards, try getting a personal loan from your local credit union. They offer lower interest personal loans which you can use to pay the cards off at which point you will only make one monthly loan payment to your credit union.
- Open a free second checking account strictly for bills and opt out of getting a debit card to avoid the temptation to dip into it. I have money deposited into one account to pay bills and the rest into another which is used for gas and grocery, etc.
- Follow the hashtag #debtfreecommunity on Instagram. You will find endless pictures that people post to share their debt free journey with others. I have to be honest, it really is inspiring to see so many people taking their finances so seriously and sharing creative ways that they manage and stay on budget. You can also search You Tube for videos that may suggest other ideas that are not mentioned here.
- If you shop online, make sure to sign up for Ebates and Ibotta. You can earn money back on everyday purchases and groceries from both Ebates and the Ibotta app. Use those rewards as fun money so you don’t feel like every dollar goes to your bills.
- BONUS TIP: I never really understood the reasoning behind leaving a credit card account open after you have paid the balance in full. I just researched this question for my own knowledge and I came across this article which breaks it down in greater detail.
I’ve wanted to write this post for quite some time. I figured since I have been sharing my No Spend journey with you for a while now, it was time for me to share this part of my #adultingmishaps with you all too. I wish that I knew more back then but all I can do is stay focused on my budget goals and hope that I can inspire you to do the same.
Until next time,