Thursday, March 20, 2014

Trying to Rebuild My Credit

Getting Credit Again

     After all of that back and forth from the credit bureaus I felt that I had to get something good out of all of that. I needed a reward, so to speak, for all of the effort I put in to getting my score up. I also learned from all that reading that you can't fix your credit by just removing the bad things. You have to add some good things back on.

    I already had some good items on there. Sheree and I had bought a van about nine months prior and I hadn't missed a payment. I had some old credit card accounts on my reports that were never late and they were aged, so that helped. I had no judgements or bankruptcies on my reports. So, all was not bad. I just had to get some more good credit items on my report in order to show my future creditors that I am responsible.

     The problem with getting new credit is that you initially take a step backwards when it comes to your credit score. The reason for this is that part of your score is determined by what the average age of all of your accounts is. Banks want to see that you can maintain a good payment history over a long period of time. It has a medium impact on your credit score. Getting new credit will lower that average age. The other reason is that applying for new credit will add a hard inquiry to your credit report. While this has a low impact on your credit score I read somewhere that each inquiry lowers your score by about two points. This is significant when your score is already low. I had to bite the bullet, though, and apply or I would never start moving my score in the right direction.

     I didn't know where to start applying, so I researched several different sites like www.bankrate.com, www.credit.com, www.creditcards.com, and so on. I was on www.creditkarma.com one day and they said that a credit card was a good match to my current credit score. I thought, why not. This site actually has my score and knows what I can get approved for. I applied and was approved! I was so excited! A fresh start and a chance to prove myself was exactly what I needed and I got that chance.

     I applied to a couple more and got one more card. Sheree was also gracious enough to allow me to add myself as an alternate card holder on her credit accounts. Her accounts were new also since she is also rebuilding her credit (although she didn't take near the hit I did on her score) from a nasty divorce, but we would rebuild together. 

     The first thing I did after receiving the cards was set up auto-pay for all of them. This was very important for me to do because I wanted to make sure that, no matter what, I would always make the minimum monthly payment. I never want to go back to the depths of credit despair again. Making on time payments is the most important factor in determining your credit score (it's about 35% of what makes up your score).

     I reviewed my credit score after all of these accounts were added and it did indeed drop. I lost between 20 and 30 points depending on which credit bureau I requested my score from because these were all new accounts that had no history on them. My average age of accounts went from an average of eight years down to three. According to www.creditkarma.com my grade is a D. Once my average age goes above four years (I'm at 3 years 11 months) That will rise to a C. I can't wait to see how much it will raise my score. Probably not as much as I want, but every little bit counts.

     I was now on my way to rebuilding my scores. I never in a million years thought that it would be this hard or time consuming, but I am taking the approach that the rewards in the end will pay off for myself and my family. Everyone deserves a second chance. I got mine and I wasn't going to fail.