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After years of zero debt and paying off her credit cards every month, Kristen valued her high credit score. But that was before the tsunami of divorce and single parenthood made it all but impossible to maintain. Kristen had been out of the paid workforce when she was an at-home military parent living in Germany. Once in the States, she knew she needed to return to school to train for what she hoped would be a well-paying job.

But again, things did not go exactly according to plan. She had trouble finding work in her field as a graphic artist. She was working part time, “and I just fell behind.” Her student loans were in default, and she really didn’t see a way to turn things around without a dramatic new start. She decided to take the radical step of selling her car and donating most of her belongings. She mailed what she would need to her grandparents, and then she bought one-way tickets for her daughter and herself from her home in Nebraska to Louisiana, to live with them for a couple of months while she got on her feet.

She found a job that used some of the skills she went back to school to acquire, and she purchased health insurance for herself and her daughter. And, with that glimmer of hope, she made some calls to see what she needed to do to get her student loans out of default (she now pays $5 a month on an income-based program, but she knows it will reset much higher). She’s not even chipping away at the $46,000 she owes, since the total grows while she makes minimal payments, but at least she’s no longer in default.

Last February, she filed her taxes as soon as she had the necessary documents, because she wanted to use her tax refund to help her begin to establish better credit. She got a secured credit card, with a $250 limit, which she has since raised to $350. She wanted to automate payments to be sure she never had to worry about a late payment hurting her credit. (After all, she was getting this credit card to help her rebuild her credit.) Her daughter needed braces, and she would have a $212 monthly bill. But if she put that on the card, she would have had a credit utilization of almost 85% — and experts recommend no more than 30%, and preferably less.

A Plan to Improve Credit

So she came up with a strategy. The orthodontic expenses do go on her secured card, but a few days before that, she makes a payment of $212 on the account. So when she incurs the charge, it does not raise her credit utilization. There are a couple of other bills she does this way, being careful to pay the credit card account before she puts a purchase on the credit card. She said she does occasionally charge other small expenses, but she has paid off the balance every month. In a sense, she is using her credit card as you might use a prepaid debit card. However, while a prepaid debit card does not report to the credit bureaus, her secured credit card does. And if she needed to dispute a charge, prepaid cards aren’t bound to the same consumer protections that credit cards are (including secured credit cards).

Asked about her unique approach, Rod Griffin, Experian’s director of public education, says,”I can see no reason her strategy wouldn’t work, as long as the account is paid before the balance is reported by the lender.” He added, “I’m assuming [she] has verified that the secured account is being reported. It’s a good idea to verify that it is. While most secured accounts are, I’ve come across a rare instance in which it is not. If the account is not reported to at least one of the national credit reporting companies it won’t help her build credit, even if the account is paid in full each month.”

Kristen is doing that, as well as checking her credit score. She has seen her credit score (an Experian FICO score) go up more than 100 points, from 426 to 529. Before her divorce, it was north of 700, and she’d like to get it there again. But in the meantime, “I’m trying to be smart with money.”

Finding Motivation, Making Mistakes

For her, that means using apps to help. She said graphic representations of her financial picture are more meaningful to her than columns of numbers, so she makes sure she quickly translates things “out of numbers and into pictures.”

She rented some furniture, in hopes that those payments will be reported to the credit bureaus (she had been told that they would). That, she said, was a huge mistake: “Now I am stuck with paying $37.35 a week until February 2016 which will be $935 more than what the furniture is worth new.” Worse, she looked at her credit report, and the furniture payments are not being reported. “The only things that I saw that are being reported is the secured credit card and the program I have for getting my student loans out of default,” Kristen said. And she is now paying off some old accounts, and will be finished with those in September.

A steady income is helping Kristen catch up — but so did realizing she was spinning her wheels and getting nowhere. Moving in with her grandparents temporarily helped, and she was able to buy a car from her grandfather.

“I’m now able to provide — to be a responsible adult,” she says. And she’s making progress against debts and raising her credit score.

Consumers can get their credit reports for free once a year from each of the three major credit reporting agencies through AnnualCreditReport.com. When you’re trying to establish a credit-building plan, knowing what’s on your report, and ensuring the information is correct, can be a helpful first step. Many credit issuers and other sources also offer credit scores for free — including Credit.com, where you can get two updated scores every 14 days. Keeping an eye on your credit scores can help you track your progress, and work to adjust your course along the way as needed.

More on Credit Reports & Credit Scores:

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    I hired LEXINGTON LAW for $100 a Month, and all that they did was removed one negative item from my Credit Report. I had about 15 Negative items that were paid for in full, when I got my BANKRUPTCY 3 YEARS AGO. After 1 Month, I called LEXINGTON LAW and told them that for $100, they should’ve been able to remove all or most of them negative items from my Credit Report. That was it. I stopped using LEXINGTON LAW, because for me, that’s WAY TOO EXPENSIVE.
    I have been PERMANENTLY DISABLED since June of 2010, and my SOCIAL SECURITY DISABILITY CHECK for a little over $1,000 a Month, has to last my Wife and I the whole MONTH and that’s with paying all of our bills and paying Rent for our Apartment, etc.
    With all of that said, I haven’t had a late payment on my Credit Report for over 4 years know, and my Credit Score is 655. My DEBT to INCOME RATIO is about 45%. To be able to get a Mortgage, my DEBT to INCOME RATIO has to be lower than 41%. That’s what,”The Housing Authority of Waukesha County”, told me after our 1st Time Home Buyers Class. This Class is MANDATORY for the people that are 1st Time Home Buyers?

  • Stephen

    I guess I don’t understand if you don’t want to use more then 10 percent of your available credit and she’s using 85 how does it not show up?

    • Cynthia Lallemand

      if she knows when they report her usage she can just pay her full balance before the report date, which will in turn give her a 0 usage balance when it is reported is what I’m thinking.!?

  • irma

    I have bad debt credit that’s 7yrs old and they are still trying to collect, its a cable co and I cant seem to get a car loan either?

    • http://www.credit.com/ Credit.com Credit Experts

      Irma —
      The debt should remain for 7 years and 180 days after it was first reported late. Have you checked your credit report? Here’s how to get your free annual credit reports. You can also get a peek at a credit report summary, and a personalized analysis of the factors affecting your score, from Credit.com. Here’s how to monitor your credit score for free. To rebuild your score, you’ll need some positive information to offset the negative. But the negative should drop off your credit report soon.

  • http://www.Credit.com/ Gerri Detweiler

    Liz –

    My concern is that you are chipping away at a little debt at a time when there is a big mountain of debt you need to overcome. I would really encourage you to talk with a consumer bankruptcy attorney to find out whether it makes sense for you to get a fresh start. You could also talk with a credit counselor but their services for debts that have been charged off may be limited. Still, it doesn’t hurt to get a consultation with one.

    As for the VA issue, I am not sure why you think you will lose your eligibility if you file. I ran this by our contributor Chris Birk from Veteran’s United and he said: “No, you don’t automatically lose it if there’s a bankruptcy. If there’s a VA mortgage default involved, then the veteran would need to repay that lost entitlement to regain it — but they may have enough left over to purchase again with a VA loan. If there’s no mortgage involved, then there’s no impact to their entitlement. In either case, they’ need to wait two years from the discharge date of a Chapter 7 to pursue a VA loan and one year from filing a Chapter 13.”

    I hope that helps!

    • Liz

      Let me clarify on VA…not lose my eligibility but unable to use due to filing bankruptcy bc lenders require at least 620 credit score to process VA loan.

      • http://www.Credit.com/ Gerri Detweiler

        My concern is you will be struggling to repay these debts for a number of years and the judgments/charge offs etc are going to hamper your ability to get a mortgage. (Interest can be charged on judgments, for example and even with your best efforts it could take years to pay them off.) I am not saying you absolutely should file, but I don’t think you should rule it out until you talk with a consumer bankruptcy attorney.

  • Habeeb

    What do I do if my secured card is not reporting to one of the credit agency?

    • http://www.credit.com/ Credit.com Credit Experts

      Did the issuer say it reports to all three credit bureaus? If so, call the issuer and let them know that this is not being done. (But not every card reports to every credit bureau . . . so it’s good to check before you choose a secured card.

  • Bill Jackson

    It has been a but confusing all 3 agency’s say something different one say I got 590 and says I got 537 etc. My FICO score is 537. I have a few items on my Experian’s file the company’s that they are for fold me to dispute them because they have no record of the account or bill. I did but their has been no change on my Experian’s file. What can I do to get that item off my file?

    • http://blog.credit.com/ Kali Geldis

      Hi Bill —

      Here’s a helpful post we wrote recently about how to dispute an error on your credit report:


      And to answer your question about why your credit score is different with each agency — that could be an issue with the data on your credit report. For instance, if Experian has a collection account in your name, but that account has not been reported by a bank or creditor to TransUnion or Equifax, the scores you get based off of the data on those reports would be different. Hope that helps!

      • Bill Jackson

        Ok thanks

  • Amanda

    Glad to know about the furniture rental places now. I thought they report too, but I guess only when you stop making payments?

    I raised my credit score from 505 to 639 in 4 months. I paid off 3 collections, then opened a secured card then got approved for an unsecured. Been paying both on time for the past 5 months. When my deferred student loan shown up, it took a few points off but so far my score has been steady at 630s. I am looking to become a homeowner soon, so glad to get some tips from here that I did not know about.

    • http://www.credit.com/ Credit.com Credit Experts

      Glad you found it useful — and congratulations on raising your credit score as well!

  • waltergro1

    I’m not sure of all rent to own furniture places but Aaron’s does report to all 3 bureaus , just not monthly . they report when any financed item is paid off on a payment plan( other than their current 4 months no finance charge plan)

  • heavyw8t

    When credit cards report to the bureaus, do they say “Jane has a $0 balance this month” or do they say “Jane spent $83 this month and made a payment of $83 so she has a $0 balance”? I have read stories that NOT using a card and staying at $0 for more than a few months may hurt you because they will quit reporting. What is the correct view on this?

    • http://www.credit.com/ Credit.com Credit Experts

      If a card is active, it should be reported, even if you keep paying the balance in full. The bigger danger in not using it is the issuer canceling it because it isn’t being used. That would reduce your total amount of available credit and could result in a lower score.

      • heavyw8t

        But that really doesn’t actually answer my question. I am asking WHAT do they report. The balance, if any, or if there was any activity since the last time they reported. Do they say “He charged 50 bucks and paid 50 bucks off” or do they just say “He has a $0 balance”? It would be the responsible activity that has the effect on the score, right, not just showing if you owe money or not.

        • http://www.credit.com/ Credit.com Credit Experts

          They report the balance. (But if there is NO activity for too long, you risk losing the card . . . and that could potentially hurt your credit.)

          • Mark

            Depending on the lender they report monthly the following; reported date, statement balance (typically in majority of cases), highest balance (some lenders use this field as highest balance at any point in the history of card or highest statement balance), amount paid (some lenders don’t report this but majority do) and due date.

            For example if you have a $300 limit each month, spend $200 each week, never allowing it the balance to go above $200, paying $200 each week and your statement closes at $200 then your lender should report the following for that months update;
            Updated: DATE
            Balance: $0
            Limit: $300 (Utilization 0%)
            Amount Due: $0
            Amount Paid: $800
            High Balance: $200

            While the ‘High Balance’ and ‘Amount Paid’ monthly paid are not factored into FICO scoring it is safe to assume they are used in lenders internal scoring systems for limit increases and approvals.

            On over half of my revolving accounts it shows the history of ‘Amount Paid’ and ‘High Balance’.

            One last thing for FICO scoring purposes having a low overall revolving utilization (1%-9%) has a more positive than have 0%. More so if you have at least 3 cards with only one reporting a balance.

            This women would see her scores rise more by getting a shared secured loan and an additional card as soon as possible. The installment would help her credit mix and the 2nd (and arguably 3rd) would as well. It would relay the foundation to her credit so they start aging sooner.

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