7 Things I Learned About Credit From Ruining My Own

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As I have addressed here from time to time, I ruined my credit pretty early in my life. I got a card at 18 (this was just pre-crash, when handing a teenager a bunch of fun money seemed like a good idea), and maxed it out within weeks. I never even entertained the idea of paying my bills, and went about my life as red flags and late notices accrued in my parents’ mailbox. Eventually they turned into collection calls, and religiously avoiding unknown numbers became as natural to me as tying my shoes. I treated my manageable-but-unfortunate pile of credit card debt (only 500 dollars initially, which eventually became over twice that with interest), as a nuisance to be avoided, like a fly at a picnic.

Still, as dumb as I was about my Visa, I wish my credit illiteracy had stopped there. I wish I could say that that was the beginning and end of torturing myself with my inability to pay bills. But looking back, I now consider my entire life from the ages of 18 to 22-ish to be a financial Bog of Eternal Stench. I accrued small debts like you wouldn’t believe — parking tickets, moving violations (which I often didn’t pay, which eventually led to me getting arrested for driving on a suspended license with suspended tags), tiny student loans, and anything else I could be dumb about. I don’t have a degree to speak of, but I have about 8,000 dollars in (subsidized) student loan debt. This is negligible compared to a lot of people I know, but considering I have nothing to show for it, the number still stings. I could have gotten out with nothing, but I was dumb and preferred to take out loans instead of working more hours at my part-time job.

And the thing was, I was never a debter. I am not a shopping addict, I don’t hoard anything, and I was never going bank-to-bank trying to get credit (one card was more than enough). I was just lazy and dumb, and lived in this weird limbo where I deluded myself into believing that my debts would just go away. I pictured a distant future in which I was wealthy enough to pay them off all at once, despite having no degree or real job prospects. (Yes, I now know how ridiculous all of this sounds, and if you’ve never experienced that particular mentality, it’s hard to imagine.) Looking back, I wish I could punch myself in the face, because nothing I ever did felt even briefly worth it — I don’t even have a nice piece of clothing from my extended period of destructive financial YOLO.

It wasn’t until I got a real job (at 22) that I started considering the debts I had with any seriousness. My salary was humble, but still enough that I could squirrel away bill payments if I needed to, and as it was the first time I’d ever had a Big Kid Job, I felt a jolt of motivation to get my shit together. My first order of business was to take care of the credit card debt from a full four years ago, which had by that point bounced around from collection agency to collection agency and followed me through four addresses, including two in France. I was terrified to call them, but they were (as they always are, I now know) kind and welcoming and ready to do anything not to scare me off. We arranged a payment plan, and within a year, my credit card debt was gone.

And while I pay other things, I still have a lot of work to do, and even as a I drive down my debt, it will be a long, long time before I have a respectable credit score again. It’s a frustrating process, but in many ways, I am invigorated and motivated by the experience, and by watching that number slowly, painfully tick up. As I earn more money, I am more driven to save and pay, if only because I know what life looks like on the other side of that equation. I encourage you to do the same if your credit score is crappy (or non-existent, or unknown), because it truly improves every aspect of your life. And here, the seven most important things I’ve learned about credit and debt, if you are looking to embark on that journey.

1. Answering is ALWAYS better than avoiding. When you have a debt that you are avoiding, you tend to work yourself into a mild, sustained panic that prevents you from taking any action, as you imagine the company/bank/government on the other end is going to scold and embarrass you like an exhausted parent. But their job is very simple: get money out of you, by any means necessary. And the easiest way to mess that job up is to make you feel scared, alienated, or embarrassed. So they are incredibly sweet, patient, and forgiving, and make no mention of the fact that they’ve been trying to get a hold of you every day for the past two months. They do their best to make the conversation feel calm and productive, and are not there to yell at you about the past. They know that if they’re having to collect on something, it’s because you wouldn’t (or couldn’t) pay it, and hashing out the specific reasons why is not going to help anyone. So call, because it won’t be unpleasant.

2. Bad credit makes you a permanent child. Nothing is more humbling — no matter what you have accomplished in life — than having to accept your overwhelming financial untrustworthiness in front of authority figures. I’ve had a book on bookshelves across the country while sitting, humiliated, in front of a banker who had to tell me that I was only eligible for the 300 dollar-limit “rehabilitation” credit card, because the bank couldn’t trust me not to run it up and default on my debt again. Paying that measly card on time every month for the past 15 months has been a satisfying and ultimately positive experience, but it certainly stung to accept that it was my fate. I’ve been rejected for several things that I should have been eligible for, once even in line in a crowded Banana Republic (!), and the experience never gets less shitty. But accepting that the world is going to treat you with training wheels and condescension is just part of accepting your crappy credit, and the sooner you get over yourself, the sooner you can work on changing it.

3. It doesn’t matter how much money you earn. I have been qualified, financially, for a lot of things that I couldn’t get because of my credit. Even now, when I earn more on paper than I ever have in my life, I couldn’t put myself on a lease for which I earn more than 40x the rent. It doesn’t matter if I have the bank statements, or an earnings letter from a CPA, or even my tax forms. It matters that they don’t think I’m going to stop paying rent one day and move to Buenos Aires, which right now could very well be my case. I luckily have several people in my life who trust me and have stellar credit, so I’ve been able to get around it, but that fundamental lack of independence is a rough reality to accept. If I want things myself, I will have to pay cash for them, at least for the time being.

4. Negotiate, negotiate, negotiate. Here’s a secret I have learned in my (sadly) extensive experience with debt: Something is always better than nothing. If you can only pay a certain amount, hold firm (but kind) with the person on the phone and explain your situation. Say you want to pay, and give the amount you can realistically commit to (because a lot of times their automated estimates are way, way off), and don’t waver until they meet it. Pretty much without exception, I have done this for my debts, and I’ve always paid once we met the right number. Sometimes it takes a few phone calls, and a bit of time, but once it’s clear to the organization that you are not going to do more, they will take what they can get. They just want to get that money, and they will eventually work with you.

5. Bad credit creates power imbalances in relationships. With parents, with roommates, with significant others. It doesn’t matter if they won’t take advantage of you, or lord something over your head, or decide not to help you. The point is that you don’t have the power, or the choice. I trust all of the people in my life implicitly and endlessly, but having to go to one of them and ask them to sign on a dumb medical thing so I can pay monthly instead of in one giant chunk is not fun, and creates a palpable feeling of inequality.

6. Don’t pay off everything without saving. You have to prioritize your debts based on interest rates, your current income, your savings, and your day-to-day life. I have very low-interest student loans for example, so I will not pay the maximum that I could, because I am in the process of saving a comfortable, necessary emergency fund. Once I have six months’ worth of living costs saved and put away, I can and will pay more, but for now — particularly starting my own business — saving is a priority. And I will never put all of my money into bills and none into savings, no matter my situation. Rehabilitating your credit and paying down debt should never come at the expense of your personal safety net, nor should it decimate your ability to save.

7. Nothing gets better until you acknowledge it, and own it. I used to be all secretive and squirrely about my terrible history with credit and debt, for a wide variety of reasons: It’s not attractive, it’s embarrassing, we are really hush-hush about money in our society, I thought it would make people judge me professionally, I didn’t want people to think I was a spending addict, etc. But once I accepted the truth about my history, and the things I would need to do to change it, it felt like an incredible weight had been lifted from my day-to-day life. Yeah, I have bad credit. Yeah, I was really bad with debt for a while. No, it wasn’t as bad as it could have been, but it’s my reality, and only getting worse by my refusal to acknowledge it. Not paying close attention to my finances allowed me, without ever spending that much, to shoot myself in the foot repeatedly and squander any attempts I made to save.

Now I own it. I never dodge a call, I never lie about my situation, and I never attempt to get around the system. I have no problem saying “my credit isn’t great, so I will be using a cosigner” for something, or acknowledging that I have student debt despite having no degree. It’s not ideal, no. But it’s my life. And my money. And at the end of the day, I would much rather live honestly and well, even if some people will judge or dismiss me because of it. Because their opinions don’t appear on my bank statement.

Feel like you’ll never save enough money to be a real person? So did Steph Georgopulos. Read about it in Some Things I Did for Money

  • Cher Vincent

    thanks so writing this. i am in a similar situation, i have a degree, but my credit card debt from when i was younger is still following me around, and the score is pretty dismal. I’m over half way finish paying it off ($2000 more to go) and the end of the tunnel is clearing, but MAN ALIVE, it’s been a real struggle. glad to know i’m not the only one to be completely idiotic with charge cards, and nothing really to show for it.

    good luck to you!

  • jdub

    This is amazing. I also am working (slowwwwly) to rebuild my credit after very similarly just being willfully ignorant and dumb about my actual money. I also have a secured credit card– and I’ve actually done a Consumer Proposal to consolidate my debts and pay them all down in one chunk every month. It affects my credit rating while paying it down, but once it’s all taken care of I get to start fresh, from scratch.

    It felt really amazing to get a handle on it and have a light at the end of the tunnel. It’s also definitely very helpful to have family who support my need to be cash poor every month while I save and pay down debts, and who understand my fervent desire to get out from under the pile I’ve created for myself.

  • Summer

    This definitely hits home. I’ve made so many ridiculous financial mistakes over the years and it is such a long, difficult, stressful process to try to correct them. Luckily I’m finally getting a handle on my shit, making a conscious effort to build a cushion of savings (something that has never been a priority because I foolishly never made it one) and familiarize myself with my debts well enough to effectively lay out a plan to “snowball” them based on interest rate and amount. I’d feel a hell of a lot better if I didn’t have 42k worth of student loans, but it is what it is and all I can do now is take care of it as efficiently as possible.

  • Michelle Monica Antoine

    Chelsea…. I do not know of you’ll read this… But… Thank YOU! This hits home for me. I mean, I have had bad credit and was ashamed for SO long and now I’m in the beginning stages of cleaning up my credit. I have student loans with no degree and I am learning how to better manage my money by living within my means. My perspective has changed, and now I’m doing so much better mentally! I want to start my own business, and theater company and I had lost hope but your article gave me encouragement. So I appreciate this…. And the advice. I’m excited!

  • Jim Marchitto

    IF people in the USA (and the world for that matter
    ) knew what and how the banks and the Federal Reserve (which is a privately owned company that has no ties to government) worked with peoples credit everyone would be shocked and in disbelief, and denial

  • Annie Goldbaugh

    Thanks so much for this. This is my story exactly (suspended license arrest and all!) and it’s extremely encouraging to see how well you’ve recovered from it. I carry a lot of shame with money, and you’ve totally inspired me to own it and move on.

  • Shannon McDonough

    I have to say that I have been struggling for years to avoid the mistakes of my past. I had completely shied away from credit/loans until my last year of college. I relocated for a job and had a little too much fun partying in my old life (a few tickets, plus a pretty awful alcohol habit that prompted me to willingly allow my car to be repossessed!) so needless to say, I have a whole mess of skeletons in my financial closet. I have been guilty of making headway in some regards, seeing the benefits, and then immediately losing steam. Thank you SO SO SO much for writing this. It was such a joy to stumble upon, and I am forever grateful for the motivation to get some real work going to fix my financial future.

  • “Bad credit makes you a permanent child.” So well put!!

  • Those are some excellent, if hard-earned, lessons learned. Thanks for sharing. I wonder how typical are the mistakes you began making after you got that card at 18. Did you get any personal finance education at school or from your parents? Maybe you just didn’t know any better because of the sorry lack of personal finance instruction offered to young people, and maybe your folks weren’t the best role models or never talked about money?

    We all learn how to handle money and credit sooner or later; for some of us, it takes a bankruptcy. Others learn from experience and change their ways while their credit is still salvageable, as you did.

  • MJ

    Man oh man #2 and #5 really hit home. Bankruptcy was a very humbling experience for me. And, for a moment, it really had an impact on my relationship with my family. Now, a few years later, we all see how it was for the best. These lessons are so very true. So. Very. True.

  • Money Gravity

    This is a great read. I wish I would have learned this earlier in life. It has been a challenge creating new habits. Thank you for the information, very helpful!

  • Spearing the Bearded Clam

    My credit is 600 for a $1000 hospital bill, not sure it’s mine, good times for the last few years. Does anyone have good credit?

  • Eighteen-year-old me did nearly the exact things you did except I had done it with several cards and then proceeded to ignore most of them well into my late twenties. When I hit thirty, it was apparent that my financial embarrassment was not going to be solved by the windfall of a six-figure salary (because it only existed in my mind) and I realized that I was the only one who had the ability to fix it.

    I’m thirty-six now and have been quite adamant about addressing my situation. I still have debt because #murica, but I’m not an idiot about it. Going from that $300 ‘we can’t trust you’ credit card issued from a bank in Nebraska to receiving an approval letter from American Express for a card whose limit makes my ass quiver in both abject fear and self-accomplishment is a great feeling.

  • Excellent description of the feeling and what it’s like to have credit issues. I’m now 34 and have went through several credit nightmares. Personally I went through credit repair company and they removed all of my past credit mistakes. Going from a 515 average (Yikes!) to in 7 months a 630. Over the last 2 years have made good decisions to increase to 680-689-701. I paid them for a year $69 per month.

  • Steven White

    I fucked all my shit up by focusing on a business and developing skills. Now I have enough talent to make some kind of an income but the overwhelming stress held me back for some time. I really liked the note on acknowledging and accepting your reality. That was the most helpful part for me. As soon as I accepted that I’d made very poor decisions on debt, I was able to grow and move past it.

  • Robert Hayer

    i recommend you contact keinetcybertechnologies at gmail . com if you think you need to improve your credit score i recently got mine increased by him and all negative collections removed from my report.