Illustration by Erin Taj

Oops, My Credit Score Is a Joke

Don’t stress! Nothing is forever, not even bad credit

Rebecca didn’t realize how far in the dumps her credit score was until a car salesman gave her a brutal reality check. She went in for a loan accompanied by her mother-in-law-to-be, who had promised to help Rebecca if she needed it.

“They ran both our credits, and the man came back and said, ‘You can’t get a used car without her help,’ ” she remembers. “ ‘Basically, she’s a diamond and you’re poop.’ Literally what he said.”

So why is a credit score so important? And can it fuck up your life? In short, yes. Your credit score is a number ranging from 300 (really bad) to 850 (really good) that helps creditors determine your worthiness for a loan, mortgage or credit card. If you’re approved, it also affects the interest rates you are offered from those institutions. While there’s no universal rule for a “passing” credit score, anything north of 720 is typically considered “good.”

For those falling under that magic number, there’s several steps to take to understand exactly where you score comes from and what you can do to rehab it.

To keep track of your credit score, you can order a report from each of the three major credit bureaus—Equifax, Experian and TransUnion—every year. The best way for a full understanding of your score throughout the year is to order each one four months apart, so every four months you get a snapshot — but it’s totally okay to do this once a year to see where you’re at. And don’t be fooled by various “free credit report” offers: Most sign you up for unwanted paid credit monitoring. Unless you have real reason to suspect fraud or issues, you’ll be fine with the actual free reports offered at AnnualCreditReport.com.

What you’ll find on the reports is a history of your credit, all the way back to that card you got with a free t-shirt in college, to your student loans and car payments. Dings are clearly marked for each type of credit; you can use the report to track how much longer a problem will continue to show up, as well as flag things to dispute if you believe they were reported in error. You can also make sure no one else is opening lines of credit in your name, and check whether any credit lines you think are closed down remain open. It takes seven years for a blemish to fully disappear from a credit report.

Instances that can impact your credit score include seemingly trivial things like late payments (even if they’re late by a single day), missed payments, abandoned cards, foreclosures and loan defaults. Even if you’re paying your minimums on time, you can still hurt your credit by keeping balances that are too high in relation to the lines of credit you have available. If you have a $10,000 limit with a $9,000 balance, you’ll look worse than someone who has the same balance but a $25,000 limit.

While it might seem like a good idea to close down accounts so you’re not tempted to spend, that can hurt your credit as well. Another factor is the age of your credit history, so the oldest card you have should stay open to prove you’ve had credit for the longest possible time. Instead of closing a card, use it once a year, pay it off immediately, and keep it in the back of your drawer for an emergency.

There is one drastic solution to debt that will restart your credit: bankruptcy. But that stays on your record for seven years, during which time you can’t get any credit. It’s only for use in a drastic case where you can’t rehab any other way. Also, debt from taxes or student loans (often the largest chunk of debt) can’t be erased through a bankruptcy.

Fortunately, Rebecca got the help she needed with her car loan, and that was the start to rehabbing her overall credit. The regular payments she made on her car loan showed her consistency to creditors; from her mid-20s to her mid-30s she fought her way out of credit purgatory. She’d racked up charges on store cards she’d never bothered to pay off, and bounced checking accounts so badly that she was flagged so that banks wouldn’t open accounts to her any longer. She’d been in “charge-off status,” where the creditor determines (usually after six months of consistent non-payment) that your debts are unlikely to ever be collected in full, and sells your debt to a collection agency who goes after you aggressively for portions of the money owed. With the car fiasco as a wake-up call, Rebecca knew she needed to turn things around.

With her reports in hand, she poured over the data, writing letters to her creditors and taking settlements to remove blemishes from her report. It took five years for her to see improvements, and then three more before her credit actually looked good. One of the biggest lessons Rebecca learned is how much it can help to have someone willing to financially hold your hand through a credit rehab, joining you as a co-signer on major purchases. Barring that, consistency and focus are key. “If you have a credit card balance that’s higher than three paychecks, you’re in trouble,” Rebecca advises. “You cannot get in that trap. It just adds up so fast.”

The other trap is only making minimum payments, which will leave you eternally in debt and keep the interest piling up. If you spend, you need a plan for paying it off ASAP.

“If you’re going to do something ridiculous with your credit card, like buy $300 Beyonce tickets, you have to mentally map out what you’re spending and always know what your balance is on your cards,” Rebecca says.

It’s not about cutting Queen Bey out of your life; it’s about keeping your credit score high and balances low, even if that means forgoing some other fun.