Michael's Credit Story—myFICO Credit Journeys
In our series myFICO Credit Journeys, we hear from regular people about how they build and maintain their credit. Today we're talking to a former paramedic, now IT professional, with a FICO Score of 734 who just bought a house and consistently qualifies for prime lending rates.
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Location: South Carolina
Profession: Former paramedic, now working in IT
Starting FICO® Score: TransUnion 587 Experian 568, Equifax 544
Current FICO® Score: TransUnion 734, Experian 730, Equifax 736
Favorite TV show: Tough one; probably The Wire or Game of Thrones. Maybe Friends.
Next credit goal: 800 FICO Score club
When did you realize you needed to start managing your credit?
In 2009 I had a bankruptcy due to the Great Recession. For the first two years after my bankruptcy, I didn't even think about my credit—I knew that my bankruptcy would be on my credit report for ten years, and I didn't need credit at the time.
It wasn't until I needed to buy a car in 2012 that I really gave my credit any thought. While I was at the dealership, they ran my credit, and of course, the loan's interest rate was high. I asked a relative to cosign on a loan, but they ended up loaning me the money directly to help me save money on my payment. Even though my relative said it would help build my credit back up, we both knew the high rate would make the payment unaffordable for the car I was buying, so I took the family loan to keep my payment in check. That was the wake-up call that I needed to do something.
What did you do to start managing your credit?
The first thing I did was start actually using my credit cards. I had two cards that I got after the bankruptcy but never used much. After the car loan incident, I started using the two cards by replacing my debit spending with credit card spending and paying them in full every month. They weren't great cards or great rates but using them over and over helped.
When did your hard work pay off?
The first payoff was when I started getting automatic credit limit increases on one of the cards. I remember logging in to pay my bill one day and saw my limit doubled. I was floored. The letter came a few days later. I knew I must be doing something correctly and kept at it until I started getting pre-approvals from large national banks, which is another way my hard work paid off. I didn't understand pre-approvals or pre-qualifications very well, which led me to myFICO for research. My credit research coupled with my earlier credit card victories led to better cards, higher limits, and better rates.
What did you do once you reached your goal?
The first thing I did was buy a car. About that time the family loan on my previous car (a Volkswagen Jetta TDI) was paid off, Volkswagen was caught in its "DieselGate" scandal, and they offered to buy the car back at a very generous price that I couldn't resist. I used part of the proceeds from the buyback to pay off the remainder of a loan my wife had on her car, and the rest of the proceeds went toward a down payment on another car for me. It was a great feeling to get pre-approvals on that auto loan and walk into the dealership in a better negotiating position.
But more so than that, the big payoff was buying another house. After the bankruptcy, we were allowed to stay in the house but eventually could not keep up with the payment. We ended up surrendering it to the bank and had been renters since then. Between the work I had done rebuilding my credit and the new job I landed after getting my bachelor's degree, we were finally in position to buy a new home. It really was something else to have our lender run my credit and not be embarrassed. I ended up with a prime rate lower than many of my friends (but I don't tell them).
What is your next credit goal?
I've never reached an 800 FICO Score, so that's my next goal. An 800 is really only for bragging rights at this point, though, because I'm finally at a place where I'm getting prime offers whenever I go looking. I may also start building my wife's profile a bit more. She has some old issues that need to be taken care of, and I would love to add her to our next mortgage.
How will you reach your next credit goal?
My 800 will come with time. Given I only truly started my rebuild in 2014, most of my accounts are still on the new side. As time passes and my average age of accounts increases, it will bump my score. Between that and paying down my student loans and mortgage, I'll get there eventually.
For my wife's profile, she just needs more accounts in her name. She's mostly left the finances to me and has never been one to open accounts on her own. Her negative accounts fall off this year, so a little time and some new accounts will help get her on the right track.
Any special tips for managing your credit during the coronavirus or uncertain economic times?
Make sure you don't overspend. With all of the instability, try to ensure you don't get overextended. Jobs are going at a record rate, and many who never thought they would be unemployed are becoming so. My bankruptcy after the Great Recession came about under similar circumstances—we were okay and current on all of our bills, right up to the point my wife lost her job. Since sudden job loss was not something we thought would happen to us, it left us in a bad place when it did happen. My advice is to watch your spending—that is probably your best safeguard right now.
This interview was lightly edited for clarity.