Success Story: Jamie Haley
Before Jamie Haley applied for a car loan, she thought it might be a good idea to pull her credit report and find out her score.
"I hadn't always been perfect about paying my bills on time, so I knew I might not qualify for the best interest rate," says Jamie, 25, a publicist in Los Angeles. "At the time I ordered my report, I knew little about what impacted a person's score."
So she was devastated to find that her score was low -- around 590 -- and that a new car was out of the question.
"I was especially disappointed in myself, because my grandparents had always warned me that your credit score is important," she adds.
Looking for answers, Jamie went to myFICO.com, the Web site of Fair Isaac Corp., the company that invented the FICO credit score lenders use.
She signed up for a program that cost about $10 a month and pointed out three big problems on the credit reports used to calculate her score.
First, she had opened three credit cards within six months of turning 18 -- the legal age you can apply for credit -- and maxed out all of them. (You should only borrow up to 50% of your credit limit.)
Although the highest limit on any of the cards was only $2,500, a major factor in calculating credit scores is how much of a consumer's revolving credit has been used.
Then she struggled to make even the minimum payments on that debt, because she was a full-time college student making just above minimum wage at a part-time job.
In desperation, Jamie swallowed her pride and told her grandparents what she had done and they rescued her by paying off the balances.
Jamie closed all three accounts and shunned credit cards for years.
Unfortunately, that was the second big reason her credit score was so bad.
Without any credit cards, she wasn't able to establish a record of reliably paying her bills. The only history she had was a bad history from the three closed accounts.
Fair Isaac also told Jamie that three unpaid bills had been sent to collection agencies.
One was a cell phone bill from an old service provider that she had paid. She disputed the debt by sending in a letter tothe credit reporting agencies and received an e-mail a couple of days later that the company had accepted her dispute and was removing the item from her credit report.
The other two were legitimate -- medical bills that hadn't been forwarded when Jamie moved a couple of years back. The contact information and her account numbers were listed on the credit reports.
"I promptly contacted them, and while I didn't have the money all at once, I successfully worked out a payment plan," she says. In return, the doctors' offices agreed to stop reporting the debts as delinquent to credit bureaus.
"It didn't take long at all before I started to see an improvement" in my credit score, Jamie says. "I began seeing an increase of two or three points at a time -- and steadily each month."
Jamie set a "starter" goal of a 700 credit score and gave herself a year to get there. She's currently at 685.
"It's been a long journey, and I think perhaps my next New Year's resolution will be to continue this journey and potentially set a new high score for myself," she says.
As for that new car, Jamie still hasn't bought it.
But someday, Jamie knows that she will -- and that she'll get the best interest rate possible because she's taken the time to repair her credit score.
Here are Jamie's tips for others looking to repair their credit and raise their credit score:
- Educate yourself. Know how to improve your credit score. "I don't think it's necessary to subscribe to a service like myFICO.com to correct your mistakes. But I have found it is a useful tool that has educated, informed and updated me on all things FICO-related."
- Pay bills online. Jamie admits that sometimes payments were late because she simply didn't have a stamp. "Setting up automatic bill pay for at least the minimum due is a great way to never be late on payments. You can always go to your online bill pay and opt to pay more, but at least you will eliminate having any 30-day late marks against you."
- Set goals. Whether it's choosing your magic credit score number or eliminating items in collections by paying them off one at a time, making yourself accountable is the most important step in repairing your damaged credit.
- Don't lose hope. It's never too late to repair what you've done to your credit. Do your best to try not to lose ambition as you slowly climb your way out of it.