When Emma moved from Europe to the U.S. as a young adult, she didn’t have a credit score. She couldn’t get a credit card, and with no income, she had trouble paying for larger expenses. Her American husband didn’t have the best credit, either, and the young couple had to rent with a roommate.
Emma (whose last name has been withheld for privacy reasons) quickly set out to improve their credit and finances. Thanks to her efforts, the couple are now homeowners with savings in the bank. We sat down with her to talk about the steps she took on her credit repair journey and her advice for people who want to follow in her footsteps.
She learned how credit works
Emma’s credit repair journey started soon after she arrived in the U.S. when she noticed a past-due bill addressed to her husband. Curious about what was going on, she says she started “doing lots of research, reading content from companies like Bankrate.”
Through her research, she quickly learned how important credit scores are for people who are looking to rent a new apartment or buy a home. “And at the time we were living with a roommate, which is not optimal when you’re a married couple, so I knew that eventually we wanted to get another place,” she says.
She checked credit reports
With her new knowledge of credit, Emma helped her husband sign up for an online platform that provides access to credit reports. Several companies offer this service, and you can go to AnnualCreditReport.com to request free weekly credit reports from the three major bureaus.
Together, Emma and her husband reviewed his credit report. It turned out that there were overdue accounts on his credit report that he didn’t know about, including unpaid medical bills. “As many young Americans, he didn’t have the best credit score because he just wasn’t really aware of it,” she says.
She settled past-due bills
When Emma called medical providers, she found they were often willing to work with her to resolve the unpaid bills. She says in many cases, companies immediately offered her a payment plan. Others were willing to accept a portion of the amount owed as payment in full.
“If I offered to pay it off today, there would be a completely different price,” she says. With time, she got better at asking for discounts and was able to settle old bills for a quarter of the original amount or less. Creditors are under no obligation to settle past due bills, but some choose to take a lower amount rather than risk the bill remaining unpaid.
She disputed credit report errors
Like many Americans, Emma’s husband had an error on his credit report. Despite making on-time payments on their car loan, the account was marked as delinquent. After doing some digging, she discovered the loan had been moved to a new servicer, and the original lender had mistakenly marked the loan as unpaid.
“I did have to call the original company and sort that out with them and make sure that they fixed that and updated that record,” she says. Errors can also be disputed with the credit bureaus. Either way, you may need to provide proof, such as bank statements or payment receipts, that the information on the credit report is a mistake.
She opened new credit accounts
After helping her husband clean up his credit report, Emma got to work building her own credit history. “Since I started so late to building my credit, I couldn’t really get any credit cards those first years,” she says. Now, she says her focus is on getting new accounts on a regular basis.
Among the easiest credit cards to get approved for are secured credit cards, which require a security deposit. Student credit cards and store credit cards can also be an accessible option for those new to credit like Emma.
She kept her oldest accounts open
Length of credit history — the amount of time your accounts have been open — is an important factor in credit scoring models. It accounts for 15 percent of your FICO score. Emma’s credit history is on the lower side compared to other Americans, so it’s especially important for her to avoid closing older accounts unnecessarily.
“I still have cards from six years ago that I will never cancel because they’re the longest-standing credit lines that I have, and so they’re always going to be good for me,” she says.
She paid her bills on time
Creditors report payments you make on time to the credit bureaus, as well as payments that are 30 or more days late. Payment history is the most important factor in your credit history, accounting for 35 percent of your score in the FICO model.
“We are consistently paying our bills on time,” Emma says. The couple’s history of making payments as agreed shows potential lenders that they can be trusted to manage credit responsibly.
She worked on her savings
Emma is a big proponent of maintaining a healthy savings account. She says when you’re surprised by unpaid bills on your credit report, it’s important to have enough cash on hand to quickly pay off the delinquent accounts.
Even after successfully repairing her credit, she still sees the benefits of focusing on saving. “It’s really important to have that savings account, and if you have a little bit more cash on hand, investing that money so that it grows for you is even better.”
She keeps an eye on her credit reports
Despite her successful credit-building journey, Emma says she knows credit cleanup is an ongoing job. “You have to check in on your credit score from time to time and just make sure that there’s nothing crazy on there,” she says. Bills could get missed, for example, if you move.
How often you should check your credit report will vary depending on your situation. Experian recommends checking at least once a year, or ideally, once per quarter. People who’ve been victims of a data breach or plan to finance a large purchase, such as a house or car, may want to check in more often.
The bottom line
Emma’s story shows that it’s possible to achieve good credit, even if you’re starting from zero or recovering from bad credit problems. At the beginning of their credit journey, Emma had no credit score and her husband’s credit wasn’t the best. With hard work and patience, Emma successfully repaired their credit and turned their finances around.
But she acknowledges that not everyone has the time to follow in her footsteps. “There are great options out there for companies that can help you if you feel like this is overwhelming,” she says. She suggests turning to a credit repair company or a nonprofit credit management company for help.
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