Fixing My Credit Score

If you are one of the people who knows me well, you probably know that I have not always been the most financially responsible person.  In my younger days, I was known to max out a credit card or two and then stop paying on them.  That's a habit that recently caught up with me when I got a new job and my wages began to be garnished due to an old debt.

I also (stupidly) took out $18,000 in student loans to attend a private college for two years.  After almost a decade of constantly receiving forbearances on my student loans and never actually paying them, that figure has ballooned to $26,000 in student loan debt...for a degree program I never completed.  The balance is so large that my monthly payment doesn't even cover the interest on the loan, so my balance continues to grow on months when I can't afford to send in more than the minimum payment.

All of this has added up to a very low credit score for me.  When I checked my score a few months ago, it was 507, which definitely puts me in the "very poor" credit risk category.  It is pretty much impossible for me to apply for credit and get approved because my credit score is so low.  This has created a real problem for me because I desperately need to get my own car, and I have been unable to get approved for financing because of my low credit score.   I am working on saving up a lot of cash for a larger down payment on the car, but I know that in order to do a lot of what I want to do in life, I need to have better credit.

With that in mind, I have begun to take a few steps which I hope will have a positive effect and dramatically increase my credit score, including:

1. No more forbearances on my student loan.  I am always making at least the minimum payment, and I am trying to send in at least enough money to cover all of the interest each month so that my loan balance does not increase.

2. I created a "cut-off" date of January 2012 in terms of my debt.  I can't go back and fix all of my old debt, but I am paying off all the money I owe as of January 2012 and won't agree to any contracts I can't afford from this point forward.

3.  I got a secured Visa card from CapitalOne.  I have the CreditKarma website to thank for that one.  I was checking my credit score for free and they suggested I could improve my score with a secured credit card.  CapitalOne had pretty good terms and interest rates, so I got a secured credit card with a $300 limit.

I'm hoping that by being responsible, paying my bills on time, and showing that I can manage a credit card, that I will be able to improve my credit score relatively quickly.  507 is a very low score, so I figure it would be hard to do much worse.

Sticking to a budget has never been easy for me, so it will be important to make sure I keep enough money to cover all of my monthly bills while continuing to save for a car.  But, I'd really like to see my credit score at 650 or above by the end of the year.  I'm going to be checking my score regularly, and I will let you know about how things are progressing in the coming months.