From 0 to 800: 3 Stories of People Who Rebuilt Their Bad Credit Scores

From 0 to 800: 3 Stories of People Who Rebuilt Their Bad Credit Scores

Do you know your number?

No, not your Instagram followers, high score on Words With Friends, or even your weight.

We’re talking about the digits that really count—your credit score.

Well, for many people, the answer is no.

According to a 2015 National Foundation for Credit Counseling survey, 52% of adults haven't reviewed their credit score in the last year, and 66% haven't so much as eyeballed their credit report.

Unfortunately, what you don’t know can actually hurt you.

Just take it from these three people, who've seen first-hand how a less-than-stellar credit score can hold you back ... until you take control.

RELATED: My Quest for the Perfect Credit Score

The Competitive Credit Fixer

Brian Hays, 26, founder of a food delivery business in Flint, Texas

His Credit Trajectory From 550 to 760

The Back Story "Back in 2010 I was a pretty busy guy.

I was an industrial technology and applied engineering major at the University of Texas at Tyler, and I had just started a new job as the operations administrator at a big-box retailer.

In the shuffle I made a major blunder—one that carried some big consequences when it came to my FICO score: I'd charged some Christmas presents on my credit card, but forgot to make payments totaling about $1,000 for four months straight.

The Aha! Moment I didn’t realize how badly my credit was affected until I was trying to buy a car in 2012, and learned that my score had plummeted to 550. I was astonished and had to forgo the loan because it would have been too costly to repay and required a cosigner.

Concerned that a low credit score would have even more severe repercussions in the future, I, along with my now-wife Tara—who, at the same time, learned that her FICO score was unhealthy—decided it was time to get our lives in order.

But before we could create a plan, we had to face the financial facts. That's when we realized that, between credit card debt and student and auto loans, we owed a whopping $40,000. We had our work cut out for us.

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"We also tapped into our competitive spirits by downloading the Credit Karma app, which allowed us to track and compare our scores."

Credit Score CPR The first step was to create a budget that scaled back on non-necessities, such as eating out. We then used any money that we freed up to pay off our debt—often contributing more than double the minimum payments each month.

On a regular basis, Tara and I scheduled check-ins to run the numbers—and encourage each other. It felt good to be accountable, and it increased our discipline by keeping our goals top of mind.

We also tapped into our competitive spirits by downloading the Credit Karma app, which allowed us to track and compare our scores. It was helpful to see how our digits improved as we eliminated more debt, and motivated us to rejigger our budgets whenever possible to make even more progress.

As a way to reestablish a positive payment history, we also opened a secured credit card, putting down $200 as collateral, and paying off the balance each month.
It was a long journey, but finally in 2014 my FICO score reached 760. I was ecstatic!

Keeping at It It took a lot of discipline and hard work, but this process has allowed both Tara and me to get our finances back on track.

These days we still have a small amount of debt left to cancel out, but it’s controlled. Our credit utilization ratio remains less than 25%.

We’ve also found easy ways to maintain good habits, like setting up automatic bill pay, ensuring we're never too busy or distracted to settle an account by the due date.

An added benefit of our progress is that, in 2013, we were in a financial position to start our own food delivery company.

We even found investors willing to entrust their money to us, and qualified for a few small business loans to help us get it off the ground—something that might have never happened had we not embarked on this journey three years ago."

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The Hopeful Homeowner

Karen Baker, 45, a marketing consultant and adjunct professor in Washington, D.C.

Her Credit Trajectory From 584 to 760

The Back Story "My problems began in 2008.

The recession had severely affected my marketing company, and closing lucrative, six-figure contracts became a thing of the past. Instead, my clients could only pay five-figure fees—resulting in a 50% income dip that hurt my bottom line.

I became so focused on resuscitating my business that I failed to notice what was happening to my personal finances as I regularly swiped credit cards without paying them off each month—sometimes missing the due dates by 30 days.

It wasn’t until I met with my accountant in 2010 that I saw the damage: My balances had ballooned to $25,000.

Worried I couldn’t eliminate that debt while running a business, my accountant suggested I close my doors and become a consultant, which I did that December.

That's when I resolved to tackle my debt and my credit score, which I learned in 2011 had fallen to a measly 584. So I started making small credit card payments—hopeful things were on the upswing.

RELATED: What Would You Give Up … to Be Debt-Free?

The Aha! Moment Fast-forward to January 2013, when I began house-hunting. Since I qualified for a government program offering down payment assistance, I expected to be approved for a mortgage.

But after working with the underwriter for three months, I was turned down because of my high credit-utilization ratio and history of delinquency. If I ever wanted to become a homeowner, the lender told me I’d have to further rehabilitate my credit score—which had climbed a little bit to 645—by paying down more debt.

Realizing I was in over my head, I sought professional help.

"My personal finances should be in the right place to re-open my business by September 2015."

Credit Score CPR The next month, I began working with a CFP®, who helped me create a budget.

After we nailed down my numbers—which involved balancing my projected income, fixed expenses and debt payments—he plugged everything into a spreadsheet.

Sitting down each week to review it was an eye-opening experience because it helped me understand where my money was going—and facilitated smarter spending decisions, like joining a cheaper gym. It also provided the structure I needed to consistently make on-time payments.

Once I got the swing of things, I was surprised at how quickly my credit score increased. Within two months, I scored a car loan with a 2% interest rate. Then I started receiving credit card offers, which we viewed as another sign my credit was improving.

Before the year was over, my score hit 736!

Keeping at It This process has been so empowering. So far I’ve erased about $8,000 of debt, and I'm proud to say that I haven’t missed a payment in years.

I’ve continued to keep close tabs on my credit—it hit 760 in November 2014—by subscribing to each credit bureau’s monitoring service.

Of course I'm not done wiping out my debt yet, but I've made some strides to accelerate my repayment schedule by earning more. I’ve gradually picked up new consulting clients, and increased my teaching schedule at a local university, where I work as an adjunct event management and marketing professor."

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The Spendthrift Student

Walter Benenati, 39, a bankruptcy attorney in Orlando, Fla.

His Credit Trajectory From 580 to 720

The Back Story "There’s only one reason my credit score fell to 580 in 2006: I lived way beyond my means.

Even though I’d worked as a waiter as an undergrad and as a law student in Miami, I prioritized enjoying the city's nightlife over saving money—and consistently found myself using credit cards to pay for necessities like gas and groceries.

The result? I accumulated $35,000 of credit card debt in just seven years.

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The Aha! Moment As I was finishing up law school, I tried to refinance my home but was denied because of the results of my credit check.

So with an eye toward bettering my 580 score and refinancing down the line, I spent the next couple of years trying to whittle down my balances. But I was quickly overwhelmed—the interest fees began to snowball, and eventually the minimum payments skyrocketed to an amount I couldn't afford.

The next step was to work with a professional service, but I had trouble finding the right fit. Through research I learned that debt-settlement companies try to negotiate lower balances if you can offer a lump-sum settlement—something I didn’t have—and credit counseling agencies help you figure out years-long payment plans.

Considering I was still $35,000 in the hole—thanks to continually accruing interest—I needed to make a more drastic move.

"Life is difficult, but the ability to pick yourself up after financial ruin is what's important. That defines me."

Credit Score CPR In 2008 I decided to wipe the slate clean by filing Chapter 7 bankruptcy. Unfortunately, that meant I had to surrender my property, but I was willing to do what I needed in order to get a fresh start.

Surprisingly, I noticed an immediate credit score bump, since all of my balances were zeroed out—although I knew I had a long way to go. So I set out to increase my score in three specific ways.

First, my wife, Lizmar, whose credit score is in the 800s, added me as an authorized user on her credit card. So her responsible behaviors, like making on-time payments, were reported to credit bureaus as my own.

Then I used $5,000 from our savings to open a secured credit card, making sure to never charge more than I could pay off at the end of each month. That resulted in the credit issuer returning my $5,000 and allowing me to keep the card, unsecured, in just a year’s time.

Finally, I applied for a personal loan with my credit union, securing it with $500 from my checking account. I never used it, but believe the uptick in available credit made me a more attractive credit risk.

It took me two years, but I finally saw my credit score reach 720. I was so excited, and wanted to shout it from the mountaintops: My credit was finally healthy!

Keeping at It Now that my credit has been restored, I have every intention of maintaining it that way by staying debt-free and relying on automatic payments to prevent any slip-ups.

I expect that my score will only continue to improve over time.

The silver lining in my credit debacle is that it pointed me to my career as a bankruptcy attorney, which I began in 2009. My own experience helps me empathize with what clients are going through—I certainly haven't forgotten those sleepless nights worrying about debt.

I always make sure to tell them: Life is difficult, but the ability to pick yourself up after facing financial ruin is what's important. That defines me."

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LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the individuals interviewed or quoted in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

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