Michael Chasan's Journey to Credit Health
Seven years ago, due to an unfortunate circumstance, I found myself in a position where bankruptcy was the only option. I planned ahead, knowing about the negative credit that I would experience afterward. After five and a half years I had a FICO score above 700. I am glad that I thought ahead, because after working as a loan officer with a major American mortgage company, I saw first hand the differences in mortgage packages for those with good credit versus those with bad credit. This blog is written specifically to provide an answer as to why you need to know your credit score and how to fix it if it is not the best.
April, 2001: I have just been granted my full bankruptcy by the courts. I am debt free. But, this debt-free status came with a price. My credit fell to the lowest it has ever been: the low 400s! I immediately began a pre-planned search for secured and small unsecured credit cards. Three, to be exact. With two of the cards I had to pay a couple of "get started" fees one of which had a $300 limit and came with $248 in fees and charges immediately on the card balance. The other card I received had a low limit as well and was unsecured.
April, 2006: I begin working a a loan officer at a nationwide company. While I only stayed with the company for less than a year, after speaking with five to seven people a day for six days per week, I learned a lot about credit and the mortgage industry. As people called into my company they were screened by a front-line agent. It was that agent that attempted to determine what the customer's needs were and if they were prime or sub-prime, in other words, was their credit good or not? In general, I worked with those people that were having credit issues. People from all walks of life and situations called in. I distinctly remember the day that I talked with two people who had homes worth the exact same amount, $200,000. The difference was that one person had great credit and the other did not. After calculating the monthly payments for each one, there was such a huge difference. They both had the same mortgage amount for the same amount of time. The only thing not the same was their credit score and how that corresponded to the interest rate that we would extend. The monthly payment difference was over $600!
February, 2007: After five and a half years, I am still on the credit plan that I entered into. With one of the credit cards I have purchased all of my groceries through out the years. On another, I have simply paid for all of my gasoline with the card. Both cards were paid off or nearly paid off at the end of each month. The third card was used for entertainment expenses. This way, I could track how much I was spending and due to the limit, had an automatic cut off to funds so as not to get into another financial bind. Using only these three lines of credit I was able to raise my credit scores substantially. I recently purchased a motorcycle at a great interest rate and by keeping up with the on-time payments, my credit will only get better.
It should be noted here that the underlying theme is that rebuilding your credit does take time. There is no quick fix. So find out what your credit scores are and implement a simple yet effective plan to build your credit back to a respectable spot. I'm proof that it is possible.
