Credit Repair: There and Back Again

Like many folks out there I spent a good amount of my time at college doing two things; drinking and racking up debts.  I previously detailed how in my mind a single purchase started me down this dark path in the post Bad Spending: How a Single Purchase can Ruin Everything.

By the time I was 22 I was in a lot of debt with no clear way to pay it back.  I fell behind… way behind.  I would get calls early in the morning and late in the evening about these debts.  It was a mess.

"See here?    That's where you ruined your life."
“See here? That’s where you ruined your life.”

My ‘solution’ was to put my head in the sand for years.  I would delete their messages.  I would throw the bills in the trash.  I felt like there was nothing I could do so that’s exactly what I did – nothing.  My credit was shot so I just paid for everything with cash.  The cards were long gone. When I had no cash, I didn’t buy anything.  It was that simple.  And no, this wasn’t part of a ‘only use cash’ epiphany about debt and America.  I simply had no credit.  I’m sure if someone was foolish enough to offer me some I would have burnt through that too.  But I was never proud of the situation – at all.

Dealing with It

Eventually, years later, I found myself in a position to actually address these debts.  I had a good paying job and a stable life.  It was time to get on with it. The weight I felt carrying these debts needed to be lifted and not a moment too soon.

My first step was to run a credit report.  Honestly, I couldn’t remember what cards I had or whom I owed.   By now many of the debts had been either fully written off or sold to collections agencies for pennies on the dollar.  With my credit report in hand I could see the dismal state of affairs in all its glory –  I owed a ton of money and my credit was destroyed forever.   Or so it seemed.

The Way Out

I was speaking with a friend of mine who had a similar experience; racking up tons of debt early in life only to finally resolve the matter many years later when finally pulling in some reasonable money.  This friend recommended I reach out to a credit repair company to see what they could do to get things on track.   I set up an account with Lexington Law (the same firm he used, but not an endorsement) and agreed to give them I think $80 a month at the time and the legal right to contact my creditors and either confirm or contest all items on my credit report.

Credit Repair: If only it was so easy
If only it was so easy

Basically, credit repair companies do the paperwork to object and ask for proof for every missed payment or debt you have.  If the company can’t prove it or doesn’t care enough to do so, it must come off the report.  They also provided an interface where I could see the current status of all of the items I was contesting and my credit report.

Within six months I was seeing my credit score make some serious movements in the right direction.   Between paying off my outstanding current debts and getting as many of the old debts as possible wiped from my report, my credit went from the 500s to the mid 700s within a couple of years.  I felt whole again.

 Morality

I’ve thought quite a bit over the years about the morality of everything above.  Several people I’ve told this all to have been very displeased with either the idea of debts being written off or their record being cleared from my credit report, often both.

I understand their argument.  I signed up for a credit card with the understanding that I would pay any charges back, and therefore I should never let any debt be charged off, or I should still pay it back even if it is.  This feels right.  This is what we would want to teach our children.  Pay your debts.

However, I would counter that all this gives a lot more credit to the card companies than they deserve.  They were not giving me thousands of dollars of credit at 18 years old as a favor.  Their goal is for people to build up debt and then pay high interest rates (up to 30% per year!) on it for many years to come.  In exchange for all of the money they earn on interest is the risk that some people (read me) simply won’t pay them back in full.  They understand, as does the law, that after X number of years, depending by state, they will no longer be able to collect from some folks, and this is balanced against all those who pay year after year.

How better to show off where you went to school?
How better to show off where you went to school?

Let’s me put it this way:  If everyone had to always pay all debts back would we allow credit card companies to charge the fees and rates they do, or to promote their services on school property with a free t-shirt or frisbee?

Now

Today I have a handful of credit cards.  Once again me and the card companies are friends and they cannot wait to offer me even more credit. I charge things every day and have not paid a cent of interest in over a decade.

Did I learn my lesson?  Yes, and then some.  I’m now super responsible with both credit and money in general.

Did I get away with anything?  Yes and no.  Some companies made some decent profits off of me, but not all of them.   In trade I dealt with a lot of grief and had ruined credit for a decade.

Do I have any advice for those deep in credit card debt?  Stop the bleeding and figure out what you owe.  Pay back what you can as fast as possible and then argue everything you can.   After all, they wouldn’t fix an error in their favor too easily I’m sure.

Do you have any stories about getting into or out of debt that you would like to share?

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