Repairing Your Credit, the Painful Truth


I was there once, struggling to pay off my debt. It was like a bad dream: I was having collectors bombard me with phone calls and letters, I wasn’t able to get a new credit card or get a car loan, and I wasn’t able to move to a nicer neighborhood, all because my credit sucked. Having strangers say, “I’m sorry but you were declined” or “I’m sorry but I can’t help you until you fix your credit” when I needed it the most was heartbreaking, embarrassing, and a reality check. At least it should have been. The sad thing is, it took forever to click for me.

No one can change a person who doesn’t want to change themselves, I guess.

Instead of changing and dealing with it head on, I ran. I ran away from the burden of trying to figure it out because I felt it was too much to deal with it. Maybe if I run, it can’t catch up to me, I thought. But it did.

I continued to feel hopeless and powerless and ultimately, I tried dumping my debt with some credit consolidation company who promised to help me pay off my debt by negotiating with my creditors and collection accounts and paying them monthly. It worked temporarily but not only was I paying for this service with money that I could have used towards paying off my bills sooner, I was still doing the same thing. I wasn’t learning to change, I wasn’t learning to budget.  No type of service like that was offered to me. That company, like countless others, aren’t there to really help us. If they were, they would offer countless training or put you into some type of accountability program to help you change your mindset. So it ended up being a mistake. A waste of time and money. It never truly helped, the horrible cycle continued as I continued to make my debt worse.

When I think about it, if I was able to get approved for a loan to consolidate my debt instead of using a debt consolidation agency, I would have taken the loan. I am glad that I didn’t have good enough credit because I would have just made the bad situation I was in, worse.

You know, sometimes we buy into all of these senseless “credit fixes” because we aren’t adult enough to deal with it ourselves. I do have to say that if personal finance were taught in middle and high schools as a core curriculum, this wouldn’t happen to many of us, including me. Seeing that we aren’t educated on money, when we are old enough to to get credit, we just spend it without thinking about the consequences just because no one taught us about the consequences. Then when we are down and out, buried in bad debt, we become easy targets. We are easily fooled into thinking that these overnight fixes can make everything better without much effort on our part or we end up going for some bad credit loans with ridiculously high interest rates that are almost criminal.

The sad truth is: no one wants to talk about money. But we should.

Instead of talking and learning about it, we tend to make excuses on why we can’t fix anything and blame everyone else. Or we just remain silent and try to sweep everything under the rug.

You can’t change the past.

So worrying and cursing the past won’t change things. Sure, if schools did teach it, things would be better for a lot of people but we are adults now. We aren’t kids living with our parents. We have responsibilities now. We can’t keep running and hiding. We have to learn to adapt and change. We can’t continue to blame others and make excuses for our mistakes. Now we have to figure out how we can fix this.

So here is the painful (and brutally honest) truth about fixing your credit. Warning: Not for the faint of heart.

It starts with you getting off of your ass and taking care of it like an adult

Yup, I said it. Get off your rear end and make some changes. Everything starts with you, no one else but you. Even if you decide pay someone else to clean up your mess, if you don’t change, you’ll get right back in it. It’s a lifestyle change. It’s a mindset change.

Stop keeping up with the Joneses, stop making excuses, stop hiding, stop blaming, and start changing the way you do things. Why? Because how you’re doing it now isn’t working, obviously.

It’s not going to go away. You can’t bury your head in the sand and think that things are going to get better, pray and hope for some money to fall into your lap, or keep playing that lotto thinking that you will win the jackpot in order to fix everything.

Been there, done that and I was still in that situation. Hoping, praying and hiding didn’t help me. It won’t help you.

And let’s say, you luck out and win that winning lotto ticket. Let’s say you had more than enough to get yourself out of debt with that winning ticket in one shot and had ample left over to live a wonderful, fruitful life. If you keep doing things the way you’re doing it, you’ll end up broke like most lottery winners.

Related: 20 Lottery Winners Who Lost Every Penny

But where to start? What do you need to do to get on the right track? Well if you are willing to make some changes and live like no other in order to LIVE like no other, then start with step one…

1) Cut Your Spending

Stop buying the most expensive shit and the shit you don’t need! Stop giving into your wants and desires when you don’t even have the money to take care of what’s important.

If you can’t pay for it in cash, don’t buy it!

Credit can be amazing, if used properly. But being that you have bad debt and you’re trying to dig yourself out of it, leave those credit cards alone! I know that there are people who will find this so difficult to do, I did, but it is doable only if you want it to be.

  • Need a car? Get that hooptie and pay for it in cash. There are plenty of cars for sale under $5,000.
  • Cook at home instead of dining out. A meal for one person can cost around $10-$17 dollars more or less. Imagine for a family of 4! You can easily make a dinner at home that costs around $2-$3 per person. Same goes for lunch.
  • Make your own damn coffee instead of heading to Starbucks. That venti cup of joe is a little over $2. Forgettabout the fancier drinks. Learn how to be your own barista.
  • Shop at cheaper clothing stores. Instead of Gap or Banana Republic, shop Old Navy, check out some sale items at Marshalls, downgrade to Walmart or Target, or try to find a good deal at a thrift spot.

There are always ways to save money and cut spending but you have to be willing to give up the glam for a bit in order to fix the situation you are in.

When you are out shopping, always ask yourself if you really need that item. Plenty of times the answer is no, unless you have no clothing what-so-ever, you have some sudden event that you must attend and don’t have any formal wear, or you have holes everywhere in all the clothing that you already have.

If you are really strapped for cash, you should really consider thrifting. Don’t knock it until you try it. I had a wedding to attend last year and I was severely strapped for cash, so I went thrifting and found a beautiful dress that I still wear to work. Cost me a whole $12 dollars (great dresses like this one usually cost around $60)!

Yes, that’s the dress.

You don’t need to get those $210 Nikes that just got released or those pair of $100 dollars or more jeans, you just want them. You sure the hell don’t need them when you can’t even afford to pay off your bad debt. What about that Triple Play Optimum cable service or that sports plan so you can watch all of your games? Consider just having internet services instead with a digital antenna to watch local TV.

What? I can’t live with out my television! What about my Game of Thrones episodes!

Relax. You’ll live.

There are ways to find things to watch online for free and believe it or not, television is a luxury not a necessity. I don’t have cable television. I haven’t had it for over two years although I can afford it now. I only have the internet and I am content with that because I got used to not having cable service. Plus for some reason, when I did have it, you could never find something to watch. Anyway, I can still watch my local news, shows, and movies online. Here’s another smart option: you can also, gasp, read a book.

The main concept in all of this is if you can’t afford it, don’t get it.

Our society is such a materialistic one with the need of instant gratification. This mentality causes us to become broke, in debt and eats away from our potentially wealth filled future. If you want something so badly and can’t live without it, make more money so that you can pay for it in cash (not credit) such as getting a second job or working extra hours. If you do decide to go for it, make sure that your bills are still getting paid!

But honestly, why the hell would you slave for things that have no real value? It doesn’t make you richer, just makes you appear as if you are richer. After you buy whatever your impulses pushes you to buy and that high dies down, you are still not satisfied and just want more. You’re just keeping up with the Joneses and creating a false sense of happiness.

That money you just spent on those sneakers could have been working for you in some form of investment. But I guess many people like living on the idea of faking it but you will never make it if you continue to follow this path.

I don’t shop on Black Friday (I don’t know how anyone could) but I do shop savvily. I am always looking for deals, buying used items (I love thrifting) and buying things out of season. One great deal I found was for my television. My LCD LG TV had died last year, not sure how because it wasn’t an old tv but whatever. I found a refurbished 65 inch 1080p Samsung LCD TV for $300 at an online electronic store. Hell yeah I bought it. It works just fine with no issues. I bought that in the summer, not some mad shopping spree during Black Friday.

Only you can make active choices on how much you spend and on what. No debt consolidation or credit repair agency will help you do that. They are not there to help you but to help themselves to your money.

Look, don’t be ashamed that you can’t afford it, there is nothing wrong with that. You aren’t alone! You just have to get creative and figure out how to save for the things that you want. When there’s a will, there’s a way, right? But, if it isn’t a necessity and it is either causing you financial struggles or will cause you financial struggles, then keep it out of your life. With everything you spend on, always repeat “do I need this, can I live without this” in your head. If your financial situation changes for the better and you are able to balance that debt without affecting your finances, than go for it. Remember, nothing is permanent, only death. Just because you can’t get something now, doesn’t mean that you will NEVER be able get it. You just have to wait for it. There is truth in that saying “patience is a virtue”.

2) Start an Emergency Savings Fund

Things happen. Things always tend to happen when you’re already struggling. One way to keep yourself away from falling into a deeper pile of debt is to have a safety cushion of funds readily available for those emergencies. I am not talking about “Damnit, I don’t have enough money for rent this month.” You should’ve already cut your monthly expenses and maximized your income so that you can afford to pay rent. I am talking about the car breaking down or a sudden loss of work. Although you should have at least 6 worth of emergency savings to cover your monthly living expenses, you won’t be able to do this in the very beginning. If you do, then why are you in debt anyway?

So the simple way to give your savings a jump start is to start with saving $1000. Keep saving some money in your savings account until it hits $1000. Find ways to fun it right away. Some ideas? Sell some stuff you don’t need, do that little bit of OT, do those online survey things, cash in the change that you have saved up in that bottle at home. Just get it done ASAP. Don’t put your extra money into paying bills just yet. Wait until you meet that $1000 threshold in your savings account. Although it is a small amount initially, it’s still enough to keep you safe from the many sudden little bumps along the way.

Major bumps may be an issue, it is what it is and bad things tends to happen when you’re  already down and out. At that point, you may have to borrow some money from somewhere but with this initial cushion, you have good enough protection for most of the little roadblocks of life which will keep you away from using your plastic. After you pay off your debt, your goal would be to grow that $1000 to 6 or more months worth of living expenses.

Now, I am not saying to stop paying your bills while you are building your emergency fund. Pay the minimum balance for each debt, except your collections accounts, until you reach $1000. If you have to dip into that emergency savings because of an actual emergency then lower your debt payments back to the minimum until you have gotten your savings back to $1000.

With savings, I don’t use regular banks. I like it when my money works harder for me. Seeing that it has to be used as a very easily accessible liquid asset and it is for emergency purposes only, I wouldn’t put it into some fancy investment portfolio due to the risks that those accounts carry. So instead, I like to use high yield savings accounts like Ally or Marcus by Goldman Sachs. Banks like these online ones gives you around 2.0% APY (or annual percentage yield) vs regular brick and mortar banks which may give you around 0.01% APY. The APY is the interest that the banks pay you for giving them your money to hold.

3) Get a Copy of Your Credit Report

After cutting your spending, you will need to start to pay off your debt. The starting point for clearing what you owe would be to get your credit report. There you will see what you owe and all of your collection accounts.

After obtaining your credit report or reports (if you decide to get both, I’ll get to that shortly) contact the creditors in order to find out what the interest rate is for each account if you don’t know that already. Typically, you can check that online by logging into your account if it is still active. If it’s a closed account, that would mean that it has already been sold to a collections company and I will get to that in a bit.

There are plenty of ways to obtain a report and there are a few types of credit reports floating around for the public to use at this time. You can go with getting a FICO credit report (which you would have to pay for), go for a VantageScore credit report (which most banks and creditors provide to their clients for free as well as sites like Credit Karma or, or go directly to the credit bureaus to use one of their credit reports.

Related: Understanding Your Credit: How Are Your Credit Scores Calculated?

Once you have your report, check to see if there are any errors and dispute them. You may be able to have items that damage your score removed if your dispute goes unanswered from the creditor. You can check this article from Credit Karma for details on disputing errors on your report as well as sample letters you can use to send to the credit bureaus.

4) Pay Off Your Debt

Once you have disputed any errors and thoroughly looked at your credit report, you can now focus on clearing your debt.  My advice is to not use a credit consolidation or credit repair agency. Seriously, you’re spending money that you need in order to do something that you can already do for free. If you have that extra cash to pay someone to do it for you, why are you in debt anyway? You could have paid them off a long time ago.

Enough with my short rant.

Target your active debt first, if you have any. Focus on the one with the highest interest rate and balance. Call them up and see if you can lower the rate. If you can’t, then just pay it off as quickly as possible. While you are targeting that account, you are still paying a minimum balance on the other accounts (just not the collection accounts, keep reading for that). You’re just paying a bit extra on the one with the highest interest rate first so that you can get rid of it.

Now I did say start with the highest interest rate one first not the largest amount or the more favorable method, smallest amount, first. Unless you can take care of multiple debts at once, stick with focusing on the higher interest one first. The reason being is that you pay more money in interest with the higher interest rate. After all, putting $500 towards a $3,000 credit card bill with an 18% interest rate will save you far more than paying off a $500 bill at 6%. Pretty simple. Once that account is paid off, you can start with the next one. Keep doing this until they are all gone

Collections are a bit different. 

If you check out this infographic from The Balance, you can see that Collections Accounts need to be worked on strategically. Ideally, you will want to get it removed completely with a settlement. If you can pay less for your debt and have them take it off of your credit report like it never existed, it would be a tremendous benefit to your overall credit but not so much with your score. Your score will improve in time, so no worries there. You can check out the details on their website.

Honestly, I would say keep trying to get them to clear it off of your credit report. Although The Balance has alternatives to clearing this debt, keep at it. Keep calling and pushing them to take it off with a settlement or full payment, even if you have to hang up on them a few times.

Collection agency’s buy the debt from the original creditor. Usually they buy it at a lower cost than the original creditor. When the original creditor has determined that they aren’t likely to collect the funds that they had loaned out to you, they will cut their losses by selling your debt to a debt buyer (collections agency). The debt buyer might pay $40 to purchase a delinquent account where the balance owed is $1,000. It is in their best interest to get more so that they can make a profit. Have you ever noticed that they offer a settlement amount that is less than what you had originally owed at times? And even with that settlement amount, they still make off with a profit.

The collection agencies always make it seem as if you don’t have any choices, but you do. They often resort to bullying or demeaning tactics but it’s all bull. If you are persistent, you can get that item removed. It may take a couple of tries. It may even take a couple of weeks or months to convince them, but just be as stubborn as they are and get it off of your report. If you don’t want to wait for that to happen and you just want to get that debt squared away as soon as possible, the next best thing is to pay it in full.

If a collector keeps a debt on your credit report for an extended period of time – past seven years – you can dispute the debt, and have it removed, especially if you have proof of the start of the delinquency. They can’t do anything about it and your debt would be wiped clean.  This is also why I say not to touch this account until you can get it off of your report. Every payment you make extends the account 7 years from the date of payment, it isn’t calculated from the initial date of the debt. So it stays on your report for 7 years after you pay the account. If you can’t remove it, pay it all in one shot. You don’t want to keep that extending that account.

Books to Read:

Disclaimer: These books are referral links to books that are on Amazon and I will get a kick back for it if you were to purchase it. You don’t have to though, you can always head over to your local library and borrow them. I feel that these books are a great start to you or someone else that you care about.

1. Although I don’t agree completely with the guy on some matters, I strongly suggest for you to check out Dave Ramsey’s book “The Total Money Makeover”. I think that it is a great start to debt freedom. If you are really bad with credit and need to figure out a way to live without it, this is the book you should start with.  I have adopted some of what he says but not everything. If you are really struggling, definitely give this book a read with an open mind.

2. If you are in your 20s to 30s, struggling with student loan debt and high rents and no financial plans, this is the book for you!

3. A gift of knowledge is priceless. Seeing that it’s not taught in schools and you want the best for your kids, start by giving them something they can use to help them navigate in this cruel financial world. 

This is all doable

Getting yourself out of debt can be done. I have done it and so have countless others. Even those who make a sub par living have done it. You just have to make some major lifestyle changes in order to make it work.

Look, you don’t have to be rich to get out of debt, you just have to make some smart choices and sacrifices. It’s part of adulting. Once you get out of debt, it feels as if you are on Cloud 9.

This is only a way to clear you debt, getting your score up takes time and some tricks which I will blog about some other day.

Have any other credit repair tips that you would like to add or other resources that others may find useful. Please comment below. If you have someone in mind who needs a slap of reality, please feel free to share this or have them connect with me. Maybe I can help!