When I was 20 years old I got my first credit card. I distinctly remember standing in front of an expensive messenger bag in the Virgin Megastore (R.I.P.) that I told myself I needed for school. I also recall swearing to my girlfriend at the time that I would just buy this one thing to christen the card, pay it off the following month, and then not use it again for a good long while. Naturally the brakes on my car went bad the following week, leading me to put $750 on that same card, putting an end to my monthly payoff plan.
Where was my rainy day fund to cover this unexpected expense? Nonexistent. Sure I had a savings account — it even had automation to pull from my checking account on a monthly basis — but I would always end up dumping that cash right back into my checking a couple of months down the road.
This cycle continued even when I earned raises and promotions at work. No change after I received that stimulus check everyone was issued in 2008. Not even moving back in with my dad at one point to “save money” could break it. None of it was doing the trick and the cycle of credit card debt and overdraft fees continued until I finally swore off my cards entirely. But that was a long time ago now.
Last week, for the first time I can ever remember, I got the courage to check my credit score. What I discovered was not the abomination I had feared for all of these years. Instead I learned that my credit was actually pretty good — even “excellent” by some accounts.
Before I get into what this revelation means for me and my financial future, let me back up and explain how I was able to make it possible.
How I Got Over My Debt Addiction
Even though I knew how money worked, that didn’t make following the rules of finance any easier. My 20s were a turbulent time for my bank account and, although some of the sins have now been forgiven, it was not an easy road. Before I could truly understand money, spending, and credit I had to fix the way I thought about a few things.
More money, but where did it go?
The biggest lesson I learned following my stupid early 20s was that personal finance has less to do with how much you make and more to do with how much you spend. Although I started making $5.50 an hour when I was hired by my local movie theater at age 16, by 23 I was making upwards of $30k a year as a senior manager of the same chain. Granted I had a lot more bills to pay than when I was 16, but it’s not like the leftover funds were spent wisely.
You would think that someone making $30k with no car payment (yet) would be able to swing $750 for a repair but I suppose that first video iPod that now feels like a brick was more important to me at the time. As I alluded to, soon after this brake fiasco, I talked myself into buying a new car as a way to save money — 20-something logic at its finest. This purchase meant that I was now on the hook for $300 a month for the next six years. But, hey, at least it got 35 miles to the gallon, right?
Death to credit cards
In what was actually a pretty genius financial play if I do say so myself, I applied for an open position what would transfer me from Arizona to California. I told my company that the rent in CA would cost me about double what I was paying and so I would need a salary of no less than $40k in order to make the move. Technically this would have been true if I had lived alone but I instead rented a room in Rancho Cucamonga, that incidentally went for less than where I was living. So a big raise, cheaper rent, and no girlfriend around to spoil with gifts — big win, eh?
Soon after I moved, I fell into the same bad habits. This went on until November of 2009 (I’ll explain how I remember that in a bit) when I paid off my credit card and vowed to never open another one. However in hindsight I realize that the credit cards were really just a scapegoat. In fact closing my card just led me to incur even more painful overdraft fees at $35 a pop! What I needed to realize was that my spending still needed to be reined in.
In 2010 I left that salaried job in order to do… something. I hadn’t quite figured out just what yet. After making one more incredibly misguided and all around dumb money move — taking thousands from my 401(k) to live off of — I started on the straight and narrow.
Eventually I got into the world of background acting, A.K.A. being an extra. As you might expect this wasn’t a very high-paying gig (minimum wage for non-union folks like me) and the work was sporadic. This might not sound ideal for trying to build a budget but it’s actually what got me to really assess what I found to be important in my life and take on a new spending mantra: “live like you’re poor.”
The irony of my new slogan was that, a lot of the time, I was poor. But all it took was one good full week of work with some generous overtime (14 hour days are common on set and double time starts after hour 10) and I’d be able to make rent, my car payment, and then some. The biggest difference was that, instead of running out and blowing that money, I held onto it, taking extreme pride when my bank account sported four digits. Gone were my fast food indulgences and splurges on what I can now solely categorize as “crap.” They were replaced by something new: peace of mind from knowing I had some breathing room in my bank balance. Oddly it felt like I had far more money when I was making much less than when I was working full time at a good rate.
At a certain point I was even budgeting well enough to afford a move to Los Angeles, saving me from what could be a 2.5 hour commute on a bad day. The steep jump in rent, although partially offset by gas savings, meant tightening the belt a little more, but I made it work. In fact I didn’t have a single overdraft after moving to L.A. — something I’m still amazed by, thankful for, and proud of to this day.
The benefits of marriage
Admittedly my credit score might not be as good as it is today if it weren’t for my wife whom I married in 2013. I can’t think of a better way to point out her (and now my) thriftiness than to say that our entire wedding cost us less than $1,000 — including the rings! Unlike me she was always smart about money and had all kinds of savings in addition to a rewards credit card she had held for years. By making me an authorized user on that card, I inherited a lot of her good marks.
While it’s hard to say exactly what impact this has had on my report, I assume it’s a large one. Even though my car payments (which had since ended), utility bills, and on-time rent contributed to raising my credit score, I can’t help but think that the lack of any revolving credit still would have dragged my score down. I guess we’ll never know for sure.
“Getting by” isn’t good enough
This is probably the second biggest lesson I learned about money in the past decade. Despite my wife’s various savings, there came a point in Los Angeles where we realized that, even though we were “getting by” and didn’t have any debts, we knew we were living in a financial house of cards. Once my wife’s hours got cut at her job, we knew it was time to make a move before we got blown over.
When looking for a new locale, our biggest requirement was a low cost of living. This led us to Springfield, Missouri where our two-bedroom apartment runs us less than half of what our L.A. one did (and this one includes cable TV and internet to boot). Because of this quick action we not only managed to avoid a financial fiasco but can now also proudly boast a real emergency fund just in case. Which brings me to last week.
The Future is Bright
Like I said, I checked my credit report seemingly on a whim just over a week ago. When I did so I was bracing for the worst but instead I saw numbers that started with 7 and green text that let me know I was doing well. Almost immediately this new information changed the way I thought about finances in my life and what it means for my future.
A home of our own?
There’s a scene in How I Met Your Mother where Lily Aldrin and her husband Marshall go to apply for a mortgage in order to buy what they think is their dream apartment in New York. As they await word of their financing offer (Marshall is hoping for a rate below six percent), they soon learn that they’re approved… at a rate of 18%. This is a scenario I feared should my wife and I decide to bail on paying rent and invest in a house instead.
Of all of the things that scare me about owning a home (I’m really not very handy, like, at all), the idea of having to pay far more for a mortgage because of my past mistakes worried me to no end. How would that be fair to my wife who had done everything right for so long? While we’re still not ready to buy a house just yet, at least I can put that fear to bed now that I know my credit is clear.
Mr. Plastic or: How I learned to stop worrying and love credit cards
My wife’s credit card is pretty great. 4% back on gas, 3% on entertainment, 2% back on food and dining, etc. However it’s the “everything else” category that’s lacking. It does reach 1% eventually but only after you spend 10 grand in that category over the course of a year. Otherwise it’s a mere quarter of a percent.
That’s why one of the first ideas that came to my mind after checking my credit report was the notion of getting another credit card that I could be rewarded for having. To be sure, the point wasn’t that I needed to be spending money on a card (we pay off our other Visa in full every month), but if we could get more free stuff then why not? Plus having another line of revolving credit in my name could possibly serve to boost my score even more.
I’m happy to say that just today I received word that I’ve been approved for a Discover It card. Without boring you with details I’ll say that we choose that card because it complimented our other one nicely by potentially improving upon that measly quarter of a percent category of the Visa. Plus, as we learned from our trip overseas just a couple of months ago, having 0% foreign transaction fees could some in handy in the future.
The last reminisce and new lessons
I mentioned earlier that I happened to remember the date that I swore off credit cards for good. This isn’t because I wrote it in some journal or made some obnoxious Facebook status announcing my life change but because that unfortunate late payment is the last relic of my dumb days that resides on the credit report. Right now it sits at six years and nine months old and so it should be gone for good by Christmas (thanks, Santa!).
This leads me to another point I’ve glossed over until now: I still have a lot to learn about personal finance. I’ll admit that, until I saw this 81-month-old late payment, I didn’t even know about the seven-year rule for credit reports. It just goes to show you that, even if you think you’re good with money, there’s still always something new to learn.
If you were to take anything away from this mini money memoir, let it be these four things: 1) it’s not how much you make, it’s how much you spend, 2) live like your poor, even when you’re not, 3) credit cards aren’t evil, they just need to be used properly and 4) it’s never too late for you to atone for your financial mistakes.
I don’t know what made me finally brave enough to check my credit report but I’m sure glad I did. In fact I wish I had checked it earlier since keeping your head in the sand does absolutely nothing to help the situation. And so, after 10 years of mistakes and redemption, I’m finally ready to move on.
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