Darrell's Story – Rebuilding Credit, the Right Way

Darrell, a new FICO® Forums participant from Texas shares the details of his credit journey in the following interview.

What motivated you to improve your scores?

I was tired of being "shut out" of many opportunities in life that are reserved for people with good credit. Some examples would be as follows:

1. The ability to purchase automobiles at a decent interest rate (and therefore a more affordable payment)
2. Reduce mortgage interest rate from 8% to current prevailing rates (5.5% - 6%)
3. Perform home improvements that were too costly to perform on just a cash basis and without credit, may never get done
4. Ability to tap credit resources to help with starting a small business
5. Establish healthy credit lines that can be utilized in case of emergency (i.e. lost job, medical care, local disaster, etc)

All of these things were out of reach for me and my family simply because we (I) did not know enough about the importance of credit scoring and its impact on our lives until recently. Just having the knowledge of what credit scores are, how they are developed, how & why they change, etc has taught me to be far more fiscally responsible than I ever thought possible.

How have your scores changed since starting your improvement plan?

Started the credit improvement process in earnest in Jan '08 after reading the myFICO forums for a week or so.

What steps did you take to improve your scores?

First, I read everything I could get my hands on related to credit, credit repair, credit scoring, etc. Once I found the myFICO website and the FICO forums, I have concentrated most of my education efforts there. Over the past 4 months I have spent more than 100 hours and read more than 5,000 forum posts on myFICO.com

Second, I pulled all 3 major bureau reports and went over each one, line by line, reading and understanding every detail of each entry. As I discovered inaccuracies, I noted them in a spreadsheet for each account and bureau. Once I completed the review process and summary of inaccuracies, I used the information learned on myFICO to dispute all inaccuracies.

Third, I also had credit accounts that were reporting correctly with information such as late payments, charge-offs, collections and others that I knew were hurting my credit scores. Again, I used the information learned at myFICO to send goodwill letters to these creditors, explaining the reasons that I had missed payments, or stopped paying altogether, and asked for a "goodwill adjustment" to their reporting to the 3 credit bureaus. As an example, I had 20+ late payments being reported for my auto loan which was caused by the way my bankruptcy was negotiated between my lender and my attorney. Even though I made 2 years of consecutive on-time payments, I was being reported late every month due to a misunderstanding from the loan modification. I wrote my credit union, explained the situation and after reviewing my file with a senior loan officer, all 3 credit bureaus were updated to reflect the on-time payments. This had a HUGE positive impact on my scores as having recent late payments can really hurt your FICO score.

Lastly, once I had my scores raised in to the low 600's, I began researching the best ways to obtain new credit trade lines from creditors that would grant credit to someone with my approximate scores and history. I utilized the web sites www.whogavemecredit.com and www.creditboards.com (credit pulls database) to understand what credit bureau was pulled by many lenders, what score people had when they applied with those lenders, whether or not they were approved, what credit line they were give & at what interest rate, and also learned if they had any derogatory marks in their credit file when they applied and how that affected the lenders decision.

I then used all of this information to apply for (and get approved) 5 new credit cards with almost $50,000 in new available credit. I also refinanced my house at 5.875% and purchased a new car for my wife through a credit union loan at a very competitive rate. I will be using these new positive lines of credit to offset the negative items that still exist, as well create lengthy new trade lines with perfect payment history that will slowly improve my score over the next 2 years.

Can you share a favorite experience from participating in the FICO Forums community?

By far, my favorite experience from the FICO forums is from the first time I learned that people were sharing information about their application and result experiences with various lenders, in an extensive conversational format. That was a "light bulb" moment for me as I realized that with some extensive reading and a little documentation, I could learn what lenders were looking for in terms of credit scores in order to be seriously considered for their products. I also learned that while credit scores are a big portion of the credit making decision by lenders, they also consider your entire history including any bankruptcies, open collections, charge offs, judgments, etc in addition to the amount of time passed since any of those events.

What were some of the challenges you faced along the way?

My primary challenge was maintaining the self discipline needed not to go out and over use the new credit lines I had just established as part of my rebuilding process. Along the way I learned that utilization (how much of your available credit you actually use) can have a significant impact on your credit scores. I have used this newly learned information as a disciplinary tool to help prevent me from running up large balances on my credit cards for "unnecessary" purchases. It forces me to consider "what's the impact to my credit score if I make this purchase, and do I NEED it"?