I Have Followed in My Parents Footsteps. - Sheena

“Dear Steve,

30 Years old, bad credit, one account in good standing, paid off all but 12000 in debt. Total household income $50,000

I am in the process of trying to pay off my debt and re-establish credit but I don’t know where to begin. I have saved $2000 for emergencies. Not I am in the process of paying off my credit one item at a time. I have been negotiating settlements and I have one more major thing and that is a repossession that I did not know about because of a divorce in which my husband took the car with him. What steps should I take to clean and repair my credit so that I can eventually purchase a home and set a good example for my children. I made a lot of dumb decisions because of lack of knowledge and I want to correct them and make sure my kids don’t do the same thing. I have followed in my parents foot steps and I want to fix this.

Sheena”

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The Answer

Dear Sheena,

I’m really proud of you for wanting your future to be better. You’ve already taken some huge first steps towards that goal.

How much debt do you have left to resolve? My concern is that with the repossession you might have so much debt it will take years to deal with. And if your number one goal is to improve your credit quickly, there may be better alternatives that will allow you to get a fresh start sooner.

As silly as this sounds, the best step for you to take to get a better credit score, is more credit. Your score can’t increase unless there is current good credit to score you on. Otherwise, your credit history effectively ends with a bad chapter of collection activity and money due.

The most effective way to get back in the credit game and not wind up with rejections for credit that hurt your credit score, is with a secured credit card that reports to all three credit bureaus. Even with the worst credit in the world you can get a secured card. Your credit limit is typically equal to the deposit you put up with the bank. That money will be held in an FDIC bank account so it’s safe.

As far as passing on good skills to your kids there are loads of books, classes and advice on that subject but really it all boils down to two key points; make sure your life fits within your income, and always make sure you’ve got money in the bank in case of an emergency so you don’t have to depend on credit.

Big Hug!

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