It’s never easy to talk about credit. Not with friends, not with
family, not online, and, most of all, not with myself. Yes, I let a
monthly payment go by here and there. I’ve maxed out my share of credit
cards. I’ve bought cars that I really couldn’t afford. I ate out. A
lot. At expensive restaurants. And I always ordered the lobster. I
always knew, in the back of my head, that I was teetering on the brink
of credit destruction. Yet I couldn’t bring myself to admit that my
credit was going downhill. I continued applying for credit cards
anyway. I didn’t want to run them up, honestly. It just happened.
One day, reality gave me a swift kick in the rear. I grew weary of
renting, so I decided to pursue the proverbial American Dream and
purchase a home. I sort of knew that my credit was troubled, but I
kidded myself into thinking that it couldn’t be that bad. I went to a
mortgage company to finance my dream. When I got there, I filled out an
application, and they pulled my credit report. I truly was not prepared
for what the loan officer said to me next. “I’m sorry, sir,” he said,
“your application has been declined.” I was absolutely stunned and
numb. I could not believe my ears. My dreams were decimated in mere
seconds. I left the office so dumbfounded that I didn’t even remember
the drive home. I got back to the apartment and I torched every Homes
For Sale magazine in the fireplace.
From that very moment, I resolved to clean up my act. Not knowing much
about credit, I had to swallow the last ounce of pride I had and called
up the loan officer I met with. They have general guidelines for
approving mortgage loans, he explained. One of the major factors that
go into an approval is your credit score. Quite simply, the higher your
credit scores, the better your chances of being approved. What’s more,
the higher your score, the better the terms of your mortgage; that is,
better interest rates, better payments, and lower down payments to name
but a few. In my particular case, my score was low. Their minimum
requirement is a score of 620. My score was 604.
The only way that I could get an approval for a home loan, he said, was
to raise my credit scores. The good news, he said, was that he could
refer me to their sister company. They specialized in approving
mortgages for people with challenged credit. In fact, they have been
known to approve loans for people with scores as low as 500!
With a glimmer of hope, I contacted the company he spoke of, known as a
“subprime lender.” Sure enough, they had good news for me. “We received
your application from our sister company, and I’m happy to tell you
that we are able to approve you for a mortgage!”
Something didn’t feel quite right, though, so I asked about the terms
of the mortgage he approved. It turned out that their loan was going to
cost me a whopping $7896.00 in additional interest for the first year,
which amounted to roughly an extra $666.00 per month! That was about
twice what I used to pay on my car. Think about that…because my scores
were so low, I had to pay the equivalent of two car payments in order
to purchase a house. Heck, I could’ve bought a Mercedes with that kind
of money, although I probably wouldn’t have been approved for a car
loan anyway. Not only would the extra interest have a disastrous impact
on my bank account, it would price me completely out of my dream home –
a terrifying thought indeed.
While I celebrated the approval, I shuddered at the terms. I
begrudgingly went forward with the lending process. Although I loathed
that extra interest, I hated the thought of not owning a home even
more. In the meantime, I resolved to find another way. Either I could
sign their loan and pay almost $8000 extra just in interest, or I could
try again with the first company after raising my score. To me, the
choice was clear. At the time, there wasn’t much I could afford anyway,
let alone two cars’ worth of payments. I resolved not to pay any more
than was absolutely necessary to purchase the house. I had to repair my
credit! With no money in the bank and no room on my credit cards, I
simply could not fathom spending $400-$500 on a credit repair agency.
My creativity had to exceed my financial means for me to get the
results I needed.
I was able to obtain a “tri-merge” credit report and found my aggregate
scores were 604, 576, and 606. A tri-merge refers to a single credit
report that contains information, including scores, from the three
major credit reporting bureaus; namely, Experian (formerly TRW),
Equifax, and TransUnion. Each has a unique formula for scoring your
credit. Many mortgage companies will use a tri-merge report to
determine whether your creditworthiness deserves an approval. Depending
on the mortgage company, they will consider one of your three scores
and go from there. In my case, the loan officer advised that I needed
to get one of the numbers up to at least 620.
Throughout the course of my research, I found a lot of resources that
explained the credit repair process. One of the most common methods is
to write letters to the credit bureaus, disputing the erroneous
information on my credit report that caused my scores to decline. In
fact, the credit bureaus themselves explain this process. Basically,
you scour your report and locate invalid entries, such as an incorrect
credit limit, or even an entry that’s not yours. Then, you write a
letter to the credit bureau explaining that the information is wrong
and ask for it to be removed. If they manage to confirm that the
entries are correct, then it stays on the report. If they can’t confirm
it, off it goes. Make no mistake; this technique is quite effective if
done correctly. The problem is credit bureaus, by law, have thirty days
to investigate the information. That doesn’t even include the time it
takes to mail my dispute, and for them to mail an answer back letting
me know what happened. At best, it would take about 40 days before I
knew anything. I simply could not wait that long. Plus, there was no
guarantee that they would remove the information anyway.
Undaunted, I continued my quest to boost my credit scores quickly and
inexpensively. Time was running out, however. The closing for the
subprime mortgage was only days away. My persistence was rewarded when
I managed to discover little-known methods that I utilized to increase
my score. As a matter of fact, my Equifax score went from 604 to 644 in
only 24 hours! Like a thermometer next to a blue-hot flame, my score
shot up 40 points, literally, overnight. I went back to my loan
officer, and he was flabbergasted. Never had he seen anyone raise their
credit scores so quickly and dramatically. He put my application back
through. Miraculously, I was approved!
I saved myself hundreds of dollars a month, and thousands of dollars a
year by being able to raise my credit scores. The best part is that,
because of the techniques I used, it only took a matter of days and not
months like the credit bureaus would have you believe. There’s an adage
that says “Cash is king.” These days, it’s more accurate to say that
“Credit is king.” Your credit scores have so much impact on your life
that it would be catastrophic to take them lightly. By raising your
credit score, you can experience the same kinds of savings that I
achieved. You’ll be able to better afford that dream home or dream car,
and you’ll realize the benefits for years and years to come.
