In the LearnVest Personal Stories series, everyday people share the details of their money lives, discussing the individual choices they’ve made and how it’s impacted their financial journey.
Today, one woman recounts how her low credit score took her by surprise—and how she made sure she was never surprised again.
Last year, my husband Tim* and I were on the cusp of buying a quaint 1940s bungalow in the heart of Atlanta.
We had been married for about six months, had both recently received raises at work (him in business development at a bank, me in investor relations for an asset management company), and were enjoying the benefits of having two salaries while saving for a down payment on a house. We were hopelessly optimistic in the way only two newly married, first-time homebuyers could be.
I knew that our credit scores would factor heavily into the interest rate we would be offered on our mortgage, so I checked my credit report online. I noticed no errors, congratulated myself on a long history of on-time payments and felt very confident about our ability to get a good interest rate.
I went to AnnualCreditReport.com, which gives you your report for free, but charges you to see your score. I didn’t bother paying the $20 for my score because I thought the report said it all. I assumed that it must be pretty high since there were no red flags and no late payments.
On the day of our loan meeting, my husband and I sat down in the glass-walled office of our regional bank and discussed our mortgage materials with the loan officer.
We reviewed our financial backgrounds and made small talk for an hour or so. The loan officer looked down at his computer to check our credit scores, and, after an unusually long pause, he stood up to close the door to his office. Returning to his desk, he said, “I think we may have a little problem.”
My heart sank into my stomach.
Looking at my husband’s score, the banker said, “Your average, Tim, is 816, which is really excellent. Great work.”
“If you’ll notice here,” he continued, turning to me and pointing at his printout, “your score is a 680, which increases your mortgage interest rate by an extra .5%.”
While my score didn’t disqualify us from getting the house, it would add over $20,000 in interest payments over the life of the mortgage.
I was mortified.
The Mistake that Nearly Cost Me
From the time I received my very first credit card in high school, I prided myself on having a good relationship with credit. I’ve never been a big spender. I paid my card off in full every month. In fact, when I went to buy a car a few years back, I got a 0% interest loan, which I thought was a clear indicator of a great credit score.
Apparently, not so much.
As it turns out, I had three problems with my credit score: My credit utilization was too high, my account history was too short, and I had recently applied for new credit. I had heard that the bulk of your credit score was comprised of on-time payments, and I simply didn’t know that these other areas could bring down my score so dramatically.
The banker typed at his keyboard for a few minutes, and asked, “Tim, do you have any debt?”
Tim replied, “Nope. Completely debt-free.”
The banker smiled a little and presented his solution. “Here’s what we can do: We’ll take Caroline’s name and information out of the mortgage, and you’ll be able to get the lower interest rate.”
Knowing this was the house we wanted, and not seeing a better solution, we went along with his suggestion. Not more than 10 minutes later, we were fully approved for a mortgage, and a few weeks later, we closed on the house. While I was happy about our ability to get our little bungalow on one income, I couldn’t get over the bitter sting of disappointment.
I genuinely wanted to help with the mortgage to show that I was an equal financial partner in my marriage. I didn’t want my husband to feel like he was taking care of me, or that I wasn’t contributing to our shared lifestyle. While my husband insists there’s no resentment whatsoever (and I believe him fully when he says it), I feel like somehow I didn’t earn the house we live in—like I’ve cheated the system to get a house I didn’t deserve.
How I Got Back on the Credit Track
Wracked with guilt and fueled by determination, I started on a mission to get my credit score back in the “excellent” range. I was determined to show myself that I was deserving of the lower interest rate. Focusing on my problem areas (the credit utilization, the account history and the credit checks), I took four simple steps.