We all have regrets — money regrets, that is. But, like all mistakes, we wouldn't be who — or where — we are today without them. In our "Money Fails" series, real people share how they bounced back from cringeworthy financial slip-ups, what they learned along the way and why they're the better for it.
Today, LearnVest copywriter Lauryn Paiva shares how her first experience opening a store credit card snowballed into a major credit fail that would take years to recover from.
As I was reciting my Social Security number to the cashier at the Best Buy in Boston’s Back Bay neighborhood, I honestly couldn’t tell you what I was thinking. I was a college sophomore at the time, so it could have been about a paper I had to write, or whether I’d be able to switch my weekend shift at work. I definitely wasn’t thinking about FICO scores, future apartment leases or interest that would accrue faster than the total of a Thirsty Thursday bar tab.
What I do remember is feeling relieved — by opening a store credit card on the spot, I wouldn’t have to pay cash for a DVD set I was buying my then-boyfriend as a Christmas present. My part-time retail income barely covered a night out with friends, let alone additional luxuries like a $45 box set of “Rescue Me.” So in my head, taking advantage of this in-store offer freed up money for more “important” purchases, like clothes. No sooner had I walked out of the store than I had forgotten all about that line of credit I had just opened, which would later become my financial Pandora’s box.
You know where this is going, right? I forgot all about the card until the bills, which I left neatly tucked in their envelopes, started to pile up. When the debt was finally sent to collections, I learned to master the art of evading phone calls. As the balance ballooned into one I couldn’t afford on a meager college-kid budget, so too did my denial. I foolishly thought if I ignored the situation (and the calls) long enough, the people on the other end of the line would just give up on getting in touch with me. Between late fees and compound interest, I ultimately ended up owing them about $550 for that one DVD purchase.
When I finally came to my senses (OK, when the debt collectors called my parents’ house), things got real, real fast. My mother, though understandably furious, bailed me out — on the condition that I pay her back what I owed. (Yes, I was that entitled millennial before millennials even became a demographic we loved to hate.)
I’d love to tell you that this experience made me a paragon of financial responsibility, but, par for the course, I had to make the same mistake several times over before I learned my lesson. That first taste of uninhibited purchasing power was the catalyst for even more impulsive spending. I applied for one store credit card after another, and continued to be irresponsible about paying those bills on time (if at all).
It wasn’t until I needed to sign a lease for my first post-college apartment that I realized my circular behavior with credit could derail the things I would need or want as an actual adult. When my real estate agent ran my credit report and saw my sordid history, he said it raised a major red flag and that I would need a guarantor to help me secure the lease. It was the wake-up call I needed to kick-start my financial makeover — and I started by bringing my credit score up out of the gutter.
By the time it got to a respectable place, the DVDs, the boyfriend and most Best Buy locations were no longer around. It took me too long to understand how my credit history could impact just about everything, but it also allowed me to take a painfully honest look at my financial behavior. Here’s what I learned:
1. Pay the Damn Bill
Fun fact: Bills don’t just disappear when you don’t feel like paying them. In fact, thanks to late fees and compound interest, you’ll end up owing much more. As I worked to bring up my credit score, I started funneling any extra money I had from freelance projects and putting those checks toward my credit card bills. If you can’t swing the full amount, pay at least the minimum due so your credit score doesn’t come back to haunt you later, as mine did.
2. Pay Attention to the Fine Print
The lease-signing, paying-bills-on-time version of me would have told my younger self to do the due diligence on what credit cards would actually work to my advantage instead of setting me up for a revolving cycle of financial failure. I learned that saving money at the register isn’t necessarily a deal that’s worth opening a new line of credit for. Now, I look for cards that offer low interest rates or cash-back rewards that help me make the most of my swiping.
3. Own Your Money Habits
Recognizing and accepting my spending triggers has been instrumental in actually combating them. For example, I noticed that I was more prone to impulse-buy when I was upset or stressed. Now when I’ve had a long day at work or a bad date, I’m more likely to go on a walk or go to (free) yoga class at my gym rather than spend money. Also, it’s worth asking yourself about whether a purchase is really worth the trouble. Case in point: Don’t go into debt to pay for something you can watch on Hulu for $11 a month.
It did take me a while to bounce back from my (many) mishaps, but here’s the good news: I haven’t messed up since. I just signed a lease on a studio apartment — no guarantor needed.