Credit & Debt
How a serial credit card abuser found redemption.
Rae has a story that many of us can (unfortunately) relate to. While this story has an unfortunate beginning, the end is lined with redemption and victory. Read on for a tale of a girl and her credit.
From a young age, Rae loved to shop. She savored the excitement of buying and the thrill of owning new things. Little did she know, she had a serious problem brewing at a tender and impressionable age. She cared so much what her friends thought and believed that having the right “things” would make her more likeable and popular. So, when she turned 18 she celebrated by going online and applying for all the credit cards she could find. ALL THE CARDS. And when her new shopping companions arrived, she took them out for time on the town. They went everywhere together. Online, in store, they even enjoyed subscriptions together. She had some great times with those cards, or so she thought. Meanwhile, she racked up thousands in debt before her 20th birthday. This toxic love story continued and pressed on despite the warning signs. By the time she had turned 25, Rae had debt collectors calling relentlessly, at all hours of the day. Rae’s once sweet love affair with credit cards turned sour when she started to realize the trouble she had caused for herself by staying in this debt cycle. She could no longer deny that this relationship needed to end.
Rae knew she had to make things right and let go of the credit cards and debt, or her life would be in ruins and her credit score in shambles.
That’s when she got serious and decided to call a financial planner. Rae needed someone to help her see the error of her ways, and rather than spew judgement, help her to free herself. Rae was new to a life without adding to her credit card debt and needed expert, sage advice in turning her life around. Rae and her financial planner worked together and came up with a 5-year plan to get her credit back on track and her finances singing to a different tune. It would be a long road, but she would be better for it.
After talking with her financial planner, Rae knew the first step she would need to take to improve her credit was to come up with a realistic but effective budget. She needed to bolster her self discipline and make wiser decisions to discontinue this cycle of unnecessary spending. She made a plan to attack the balance on all of her credit cards. She knew after calculating the payments, by making the minimum payment, she would be stalled in debt for an absurdly long time. Rae started making higher payments on the cards with the highest interest rates while continuing to make minimum payments on the cards with the lowest. She was careful not to miss payments and add late fees and penalties to her already high balances.
Rae worked hard and kept her goals front and center, declining to make purchases that she didn’t sincerely need. As time went on, Rae was able to start paying off her highest interest cards. This wasn’t without sacrifice, but it was so worth it. When the cards with the highest interest rates were paid off, she canceled them and continued the planned pattern until she had only one credit card – the one with the lowest interest rate remaining. Rae learned to only buy what she could afford and not put purchases on a card to “pay at a later time.” If she didn’t have it, she didn’t buy it.
After several years of payments being made and credit cards being canceled, Rae was finally down to this one credit card. She had increased her credit rating by paying off her cards and proving she was able to make payments on time. She called her credit card issuer and asked for a credit limit increase. But Rae was more responsible this time around and wouldn’t be using that increase for purchases, but rather only to improve her score. Because she had proven her ability to make payments and her credit score had improved, she was approved for a small increase. This increased limit inched her credit score even higher. She showed that she possessed the control to have more available credit and not use it all. Rae had learned.
Now that Rae had paid off her debts, she was able to work towards a viable savings account. She began focusing on putting a minimum of 20% of her earnings into a high-interest savings account. Because Rae had no more debt to make payments on, this became easy and required no extra money than had already been going out. Instead of paying debts, she was paying herself. After several years of saving, Rae was able to put a healthy down payment on a home and apply for a mortgage – which she was approved for due to her financial diligence and high credit score- that she worked so hard for.
Rae now owns a beautiful home and continues to maintain good credit by paying her bills on time. By saving an appropriate amount in her emergency fund, Rae now feels confident she has enough money saved to continue to pay her bills in the unlikely event that she is unable to work for up to 6 whole months. She is properly insured and her credit rating has improved from a 320 (poor) to a 720 (very good) – a substantial increase. It took a great deal of hard work and dedication, but after several years Rae was able to repair her credit and get herself out of crippling debt. And with an improved credit score and overall financial situation, came a more confident and self assured version of Rae. It was a long journey and was not without its trials and errors. In Rae’s case, slow and steady won the race and set her up for a bright future free from the burden of credit card debt.