I was caught off guard when my credit took a nosedive when I became newly divorced. I had older parents and they were old-fashioned. Their idea was that you pay as you go. When I was in middle school, I was the only one in my peer group that had parents who still used layaway. My parents worked hard, and the only thing they ever got on credit was our house, a modest two bedroom, one bath house. When I was in middle school, my dad and neighbor worked in the evenings and during the weekend to add a bedroom and bathroom to our house. They took their time, and did the work as my dad’s budget allowed.
When I got a job after school during my sophomore year, I started saving money to buy a car. It was my uncle, instead of my dad; who helped me get my first car. It was a Ford Maverick, in bright lemon yellow. I bought it on credit, which was something my dad frowned upon. He always saved and paid cash for his cars.
Fast forward. I married while in college and then divorced almost ten years later. My credit declined during the marriage, but really went south after the divorce. I started the marriage with all the good credit, so everything was in my name. My ex-husband looked at that as an opportunity to walk away from any responsibility, since I was the one who initiated the divorce.
Here I was on my own as a divorced single mom. I wondered if it were futile for me to try to improve my credit, while rebuilding my life from the ground up.
Believe me when I tell you that divorce can come with collateral damage that goes beyond the dissolution of a marriage. If you have a childish man like I did, you will shoulder most of the financial responsibility during the marriage and afterward.
Once I looked at all my bills, I got overwhelmed with how many different due dates they had. When I was able to pay them during another season, those due dates were not a problem. Once I realized how overwhelmed I was and owned the fact that I couldn’t keep digging into my tiny savings and meager paychecks to meet these numerous obligations, I felt desperate for a few days. I also felt defeated. And then someone told me about BrickLoans.
BrickLoans were the only ones who could help a person like me to resolve my debt. I was able to get a fast cash advance loan and do some debt consolidation and free myself to have one bill due date. When I sought this loan from BrickLoans, they wired the loan amount directly to my bank account within a few hours.
I then had only one due date, instead of seven. This alone gave me peace of mind and more freedom to take a deep breath when I got a paycheck.
I admit that I had some late payments with those seven creditors before I got the BrickLoan. This hurt my credit score. I wondered what I could do to improve my credit. I hated to be left with the idea that my ex-husband was still ruining my life and damaging my credit after I parted ways with him. It was making me feel bitter and resentful.
So I attacked this problem on two fronts after I resolved to get over my issues. I started to mentor young ladies and teach them to not get involved with a man with bad credit and a history of being irresponsible about debt. I told them that such men will be like a stone tied to your ankles, causing you to sink, and even drown. The next thing I did is to get myself on the pathway to rebuilding my credit. I made up my mind that one bad decision, marrying a deadbeat, didn’t have to follow me for the rest of my life. The recently departed Maya Angelou, in her book “Letters to my Daughters,” shared something that helped me want to get back up again and show myself to be creditworthy:
“You can’t always control all the events that happen to you, but you can decide not to be reduced by them.”
So, after making regular payments to BrickLoans, I started to make extra payments to apply toward reducing the principle. I also started to earn more money, not a lot more, but enough to start to have some wiggle room. I increased my savings and at the same time paid off the BrickLoans advance.
Another miracle came my way. I went through a teacher Alternative Certification Program, and got into the teaching profession where I was able to make more money. I was no longer in a job, I had a career. I was making more money than ever before.
A few co-workers with poor credit shared with me that they had used SpeedyNewLoan to help them. They were the type of teachers who tutored before and/or after school and taught summer school. The one thing they didn’t have is extra time. They told me that SpeedyNetLoan helped them by searching for a variety of loan opportunities and assisted them with picking the one that was best for them. They were like a loan facilitator.
I wasn’t in the same predicament they were in. By this time, I was looking at decent credit. People told me about Springleaf Financial, which was for people like myself. This company was solid and served people well. I got a loan to help me pay for all the new materials I needed in my new career. I had already heard how teachers had to come out of pocket to get things for their classroom and students. Experienced teachers told me that not all students came from families who were able to afford the items on the school supply list. They also disclosed that the supply reimbursement they gave teachers in September did not come close to covering the expenses they incurred throughout the year.
I want to make quick mention of a company I came across, Lendio. A very close friend had to go through the process of getting a very small business loan, in order for her to continue to pay her two employees during an extended ferocious series of winter storms. She chose Lendio because she heard about their simple 3- step loan process and their strong review in the Better Business Bureau. She also added that if her company was not prepared for a loan then Lendio would supply her with the tools to prepare. This is how she explained the process to me;
She filled out a basic form containing information about her business. She then let Lendio match her with the loans she qualified for. After a 3 weeks her loan was complete, and she was comforted that she was matched with the best loan option for her business.
I craved to become a homeowner. Here I was, creditworthy and making enough money to pay a mortgage; but the real estate market had changed. I had a positive credit history and I wanted a well-priced, low cost home loan. I was at a loss as to how to do this. I went to GetMoneyFast.com, and they took me in hand. I found out that they knew about the way the real estate market had been rocked off its core. They showed me what I had to do to become a home loan borrower. Some of the ideas they shared with me follow below:
- A mortgage, auto or credit card late can lower a credit score by approximately 100 points.
- Consumers should keep the highest possible credit limit on their credit cards.
- Consumers should stay below 30% of their credit card credit limit at all times.
- Consumers should use each of their credit cards at least once each 120 days so it continues to rate to the credit bureaus.
- Acquiring credit cards from department stores (or gasoline cards) can lower a consumer’s credit score by approximately 20 points per card (for up to 12 months). Be aware before you just say yes to opening one additional card.
- Consumers should keep a variety of credit accounts open. This will enhance the consumers credit scores. Those accounts would include; a mortgage, auto(s), a student loan and 3-4 credit cards. However having too many credit lines open can hurt as well so optimally 5 or 6 open lines are best.
- Closing a line of credit with a zero balance won’t improve a consumers credit score and can sometimes hurt.
- A consumers credit scores will drop on average approximately 7 points when an inquiry from a mortgage company or automobile sales/leasing firm is made. However, a consumer can have multiple inquiries from these types of firms within a 14 to 30 day window and there will be no addition decline in credit scores. In addition, the mortgage inquiry doesn’t lower a consumers score for approximately 30 days.
- A credit score is a snapshot in time. For example: if a consumers credit card balance is high at the time the credit is pulled, that is what the score will reflect.
- Please note that the impacts to scores vary due to each individuals personal credit profile and the mixture of both positive and negatives credit lines.
- It’s wise to minimize actions in the four to six weeks before applying for a loan or refinancing.
Another thing that I want to remind everyone about is the importance of checking my own credit score.
Working with GetMoneyFast.com was an education. While I was learning, I put purchasing a home on hold. It ended up being one of the best things I ever did.
Here’s a few more things that they taught me while I was getting ready for home ownership:
- Credit scores are one of the most important components of a consumer’s personal finances. It dictates the quality of the loan you would be eligible for as well as the interest rate which will be tacked on to the borrowed principal. Potential lenders and creditors base their decision to grant or deny you a line of credit based on your credit score.
- Developed in 1970, the Fair Isaac Corporation introduced a method to measure the ‘creditworthiness’ of an individual. It took into account multiple factors like the length of an individual’s credit history, recent ‘hard’ inquiries, credit usage ratio, etc. while calculating the score.
- In the years following the formal adoption of the FICO scoring system by businesses and lenders all over the nation, a handful of consumer and credit analytics company developed their own credit score formulas and scoring models. Currently, there are 5 different types of credit score formulas (including the FICO formula) in circulation, each with varying characteristics. This has caused much confusion within the consumer community.
They also shared an analysis of the major scoring formulas, as indicated below:
The FICO score
This is the most widely adopted credit score and scoring model in the industry. The Fair Isaac Corporation is the father of the FICO score and is the originator of the credit report concept. Credit reports are generated by the three leading credit reporting agencies (CRA), namely, Experian, TransUnion and Equifax. Since every creditor doesn’t report to all of the 3 credit reporting agencies, FICO scores generally happen to vary from CRA to CRA. Sometimes, the score point deviation can be as much as by 80 points. The FICO score scale runs from 300 to 850 points.
The PLUS score
PLUS is an acronym for Plan, Live, Understand, Succeed and this particular scoring model was developed by Experian. The formula and the score calculation system was developed solely keeping consumers in mind. Unlike the FICO score scale, the PLUS score ranges between 330 and 830. The Experian PLUS score is not the same as the Experian ScoreX PLUS which is not available to consumers.
This particular scoring model was developed in 2006 as a joint venture between the top 3 credit reporting agencies. The scoring model had been developed to compete with the FICO model and scoring system but failed to catch on. Very rarely do lenders and financial institutions use this particular scoring system. One of the major advantages of the VantageScore model is that the score gaps between reports generated by all the 3 major CRAs are significantly smaller since the scoring model and the underlying computational algorithm used by the 3 CRAs are the same. The VantageScore scale ranges from 501 to 990.
There are two more scoring systems which are little known and rarely used by consumers. These are:
TransUnion TransRisk Account Credit Score
The proprietary scoring model was developed by TransUnion and free credit score providers like Credit Karma are known to use it. TransRisk offers separate scores for home and auto loan accounts. Their scoring scale ranges from 300 and 900 while home and auto credit score scale ranges between 150 and 950.
Equifax Score Power
This particular score is not based on a different scoring model. Rather, it is the name Equifax uses for the FICO based score that appears on the credit reports generated by Equifax.
One of the more important things to note is that the score varies according to the scoring model used for the calculation. Therefore a FICO score of 750 is in no way comparable to a PLUS score of 750. Other than these 5 scoring models there are a few others which use different parameters to calculate credit scores although most lenders.
I came to understand that if I didn’t get educated about credit, gain insights into how things work in the loan industry and what my responsibilities as a consumer were; then I might find myself back in the same credit mess I was in during my marriage and after my divorce. I didn’t want to repeat my mistakes. I was concerned that if I repeated my mistakes, I could lose all the ground I’d gained. I felt that it would be oxymoronic for me to be a teacher, advocating knowledge; and not get all the information I could get about something so important to my overall well-being. Only after being thoroughly schooled did I buy my dream home.