Ahhh, the good 'ol days when I would buy whatever I wanted regardless of how much money I was making.

It's ok, I have these 4 plastic cards in my pocket that will lend me some money. I can pay them back whenever I want. I'm a college student living at home, they'll understand if it takes me a while to pay them. Heck if I miss a payment or 2, no biggie, we're cool like that. They gave me a $5,000 limit for goodness sakes, they must trust that I'm good for it.


This was my thinking back in my late teens-early twenties. They would hand out credit card applications that came with free t-shirts, basketballs, and there was one that came with a coupon for free pizza. Interest rates, hard credit pulls...who cares, look at my shiny new ball :)
Well after this dark age of running up meaningless"bad debt" on everything from clothing and food to drinking and partying, reality hit me when I got older and my credit report was flooded with collection agencies and I could not qualify for any kind of loan.

To make a long sorry short, after reading tons of books and making myself more accountable for my actions (as opposed to blaming the "bastards" who gave me the damn cards), I knew I had to do something to get my credit back in order.

I don't know what it is called, but I call it the snowball effect (that may be a residual memory from one of Robert Kiyosaki's books). Blogging Away Debt has a nice post regarding this method and the alternative here. I sat down and listed everyone I owed money to and then arranged the balances from lowest to highest. I decided to pay off the smallest balances first while paying minimums on all the rest. Now I had a lot of accounts in collections, so I had to work out payment plans with many of these companies. Of course I got all of this in writing before agreeing to make a single payment. I got plenty of advice from the Credit Info Center and from Bud Hibbs. I also knew that I had to increase my income if I wanted to attack this debt as oppressively as I wanted to. I got a 2nd job as a bartender, and a 3rd as a real estate photographer. I was still finishing up school at this point but I pretty much sacrificed my social life to get everything in order. "If you want anything in life, you have to make sacrifices", that was my mother's favorite saying and admmit she was right. I had amassed over $15,000 in credit card debt, overdue balances and a small student loan which I applied for when I was attending a school I could in no way afford but blindly jumped into. I don't remember the exact balances but they were something like this:

MasterCard: $4,000 (collections)
Visa: $3,500 (collections)
Sears: $3,000 (collections)
Student Loan: $3,000
Cell Phone Overdue Balance: $500
Macy's: $350
Verizon Land Line Overdue Balance: $150 (collections)
Citibank: $500
Washington Mutual: $350


Just to give a little background, I was under the impression that these big companies did not care about a measly $3,000 balance. if I ignored them long enough they would just forget about me and the debt would just disappear. If you got a summons in the mail from a collection agency later on, just ignore it, their trying to scare you. Most people in my family don't have savings accounts, or any sort of assets so I'm guessing when they have been sued for past credit problems, there was nothing to garnish or freeze so the debt eventually passed the statute of limitations (7 years in New York) and it did eventually disappear legally. I love my family to death and we are extremely close, but we did not agree on this point at all. I had no intention of waiting 7 years to qualify for anything.

I also could not open a bank account because of the money due to Citibank and Washington Mutual, ChexSystems is a bitch to get out of.


I told all of my employers that I would need either cash or a physical check, I had no means of direct deposit. I lost so much money cashing checks at those damn Check Cash places, this just motivated me more. First to go was the collection agency that Verizon sent after me, they got paid in full. Second was Macy's and the Overdue Balance I had with Sprint, I had a good month bartending and taking pictures so these both got knocked out. Washington Mutual was next to go. At this point I decided try to open an account with a new bank that opened up in my neighborhood. A friend of mine told me that most new banks want to open as many accounts as possible and that they may not even run my name through ChexSystems. He was right, I was now the proud holder of a free checking account with Commerce Bank.


This made things much easier, no more money orders or running to the check cashing place. Commerce is also open late and on weekends, so the money I made from bartending was quickly deposited and didn't have to sit in my room. Around this same time, I got a job as tax preparer for a local company working nights. I used the money I made here, which wasn't much, along with the $2,400 return I got that year to pay off my student loan. Well they actually took my Federal return which I wasn't planning on giving them, which left a small $600 balance. This was shortly paid off.

I made an agreement to pay $2,000 to the agency which held the Sears account, one large $500 payment and 6 monthly payments of $250. They agreed to report the account as "paid in full" to the 3 major bureaus, Equifax, Transunion, and Experian. They faxed me a signed agreement stating this and we were off and running. While I was paying them, I had already agreed to terms with the other agency which held my Mastercard account. They agreed to $25/month and I would send extra if I could. There was no interest being charged on this account. The Visa had also agreed to $25/month, plus after an initial payment of $500 they lowered the balance due to $2,500. Once I finished paying off the Sears account, I took that payment of $250 and added it to the $25 I was already paying to the Mastercard collection agency. $275/month plus any extra cash I came into if I had a good week. This was eventually paid off, which leaves me with the still being paid Visa.

I got signed agreements from all of the colection agences before I made any payments, and that is the best advice I can give to anyone trying to fix their credit. Once you start that much harder to get them to agree to anything (such as reporting properly to the credit bureaus. It wasn't easy and it took a lot of back and forth negotiating, but I kept detailed records of all paperwork and phone conversations and made them commit everything to paper.

Since we've had the baby, I only work my main job so i can spend some time with my family. It has been well worth it as I would have missed so much if I had kept going at the rate I was. The new debt balances are as follows:


MasterCard: $0
Visa: $1,100 (collections)
Sears: $0
Student Loan: $0
Cell Phone Overdue Balance: $0
Macy's: $0
Verizon Land Line Overdue Balance: $0
Citibank: $0
Washington Mutual: $0
Target: $100
Wife's Student Loan: $6,000 (Deferred until Graduation)


We only use the Target Card to buy things for the baby, which we quickly pay off. I have also since applied for and received two secured credit cards to start building up some positives on my credit reports. The two cards report as normal unsecured debt. I located these two banks using BankRate. I have the cards for a little over a year and they have really helped my score. Whatever I charge to them is paid off monthly, although, I do leave a small $2-$5 balance on them just to keep my payment history looking up to date.

One more collection agency to go (Mastercard) and we are all done. It was long hard road that took a lot of work and sleepless nights. I am determined to teach our baby so she wont have to go through the same thing.


I know this was a long post but it was a long journey. It seemed short but this all took me about 3 years to pay off some $14,000, along with the other bills I was helping my mother with while I was still living with her, and tuition, and get my credit back to a decent standing. When I first started it was beat up from the feet up. I could have used that money for so many other thing, I've learned my lesson. The goal of a 700 credit score before we start house hunting is very much in sight, look out 'cause we comin'. I now use credit wisely, I use it to my advantage the same way I use the stock market. I regret nothing, I learn from my mistakes and keep it movin. The person I am today was created by the person who made all those bad choices in the past.


Thanks for reading
I love you Baby

13 comments:

  1. Anonymous said...

    I can certainly relate to this in terms of our son. He managed to get himself in such a mess with credit cards. He "only" has a $2000 balance on his card, but is paying 30% interest. I think at the rate he is paying it off he will NEVER get it paid off.  

  2. Kristina said...

    Great post. Thanks for sharing your debt story.  

  3. Rad said...

    Kristina:

    Thanks and thank you for reading. Come back anytime.

    Anonymous:
    Sit and have a talk with him. Even if he dosen't ask for your advice, try to steer him in the right direction. My mom was always there for me and I am so grateful for that. He'll come around, it takes men a little longer to figure things out than women :)  

  4. Adventures In Money Making said...

    congrats on paying it off. i had a friend who was in a similar position.
    he got another job at denny's just to get out of debt. 6 months of work and a lot of negotiation later, his credit score went from 600 to 680.

    A year later he's sitting on 30k in the bank and has a credit score of 725!  

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  6. Cashtilpay said...

    Good to hear that now you are out of debt cycle. Congras.Thanks for such sharing of experiences.Thanks for such post.  

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    There are many debt repayment programs out there, but the first thing that you must gain is a clear understanding of your own financial standing. I had tried my best to settle my debts on my own, but in the end my efforts went in vain due to a lack of knowledge. That's one reason why we got in touch with a debt repair company; they are handling all our issues relating to the collection agency Baker, Bloomberg and associates. In the mean time, we've researched more on the various debt repair strategies and gathered information on Baker, Bloomberg & Associates complaints. The CA seems to be willing to take things in the positive direction.  


 

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