When I was 18 years old someone handed me a credit card. At the time I had no idea what a FICO score was, or that I needed good credit to purchase a home or a car. All I knew was that the credit card had a five hundred dollar limit.
My story is not rare almost everyone in America goes through the dreaded credit crises. Credit card and short term lending companies are there to pull you in, and collect on the interest, from all the shopping you couldn’t really afford. And when you can’t pay anymore, debt collectors will harass you until all debts are paid. Once a trade line on your credit has a late payment or a collection account, these negative inquires will often stay on your credit for up to 7 years and sometimes 10. And unless your making a million dollars a year, everyone from your little cousin in high school to your great aunt in the mid-west has, at some point, had a credit card.
Here is what I went through from my first credit card and 8 reasons why you should never apply for a credit card.
- Receiving a Credit Card at a Young Age is a BAD idea.
I was fresh out of high school and it was the first day of college, I was registering for classes with my good friend Sam, who had decided to tag along with me to every single classroom. In between adding classes we decided to have lunch, on our way back to campus a tall skinny man with a suit and tie stopped us and asked, “how would you like to have this pen?” He held up the pen, it was all chrome and looked magnificent in the sun light. I wasn’t about to fall for that, I said no thanks and kept walking, but Sam wasn’t next to me. I turned around and saw Sam with the man filling out paperwork on a small binder, I walked towards him and asked, “what are you doing Sam?” He looked at me and smiled, then he looked down on the paper work and kept writing. “Applying for a credit card,” he said. I looked at the man in the suit and tie, “would you like to sign up for one to?” he said. I told him no, but Sam insisted that I do, I refused again and he called me a chicken and said that I was scared. So I took the paper work from the man and started filling out the forms, only I was to afraid to write down my real name and address or my social security number, so I just made one up. When I was done the man handed both of us a pen and walked away.
A week went by and I gave little thought to these events, I simple got out of bed, took a shower, dressed, ate my breakfast, picked up Sam and we headed for class. Around twelve o’clock we had an hour and a half break, I was hungry but low on cash, Sam was a big guy and he was always hungry and always out of money. So I was a little surprised when he offered to buy me lunch. I said sure, we walked towards a Yoshinoya just outside campus. We both ordered, and the bill came to around nineteen dollars, Sam took out his wallet and paid with a credit card. I was stunned, how did he do that? A small piece of plastic, with a five hundred dollar limit. He looked at me with confidence, “when did you get that?” I asked. “Saturday,” he said, “You didn’t get yours?” I told him no and that I had filled out false information on the form, he started laughing. We sat and ate and the whole time I was thinking to myself, what could I do with five hundred dollars? The possibilities were endless. A PlayStation, a new pager (it was 1999 at the time), a new car stereo? I must have a credit card, I thought.
- If Everyone jumped off a bridge would you?
When we got back on campus, I saw the man in the suit and tie walking around on campus with his binder. Sam and I approached him, “I’d like to sign up for a credit card,” I told him. “Sure,” he said, “just fill this out.” I realized he did not remember me from the week before, so I filled out the forms with my correct information checking and double checking everything.
At the time I really had no job, I had a bank account with a few hundred dollars my mother had set aside for me. Most of my money came from financial aid which I used to pay for school classes and books. But this credit card, this credit card was like magic, swipe it and money comes out and I buy what I want!
Well the card barely lasted less than a month, and soon I found myself applying for another one, and after that another one, within two months I had four credit cards with no income, and all my cards were maxed out. I did not tell my mother, figuring that she would be very upset with me and be forced to pay the cards off.
- Stop Over Extending yourself.
Then one day me and Sam and a few of our other friends went to the mall, we walked around not really buying anything, maybe a snack or two, until we went to Macy’s. Sam approached the lady at the counter, “I’d like to apply for a Macy’s card please,” he said. A Macy’s card? I thought, what is that like a credit card, but only used at Macy’s? So he applied for one and on the spot he was given a two thousand dollar credit limit. And on the spot he started buying cloths, not just for himself but for the rest of his friends to. I was a little hesitant at first, but finally I picked out a beanie and he bought it for me. I thanked him and applied for a Macy’s card as well, my credit limit was only three hundred dollars, but still good I thought, next we went to Robinsons May and then JC Penny and applied for credit in each store. Sam would always get the higher credit amount and I was given a few hundred dollars each time.
After I maxed each and every single credit cards I had, I called the credit card companies and asked for an increase, to my surprise I was granted a credit limit increase, from five hundred to a thousand. After the thousand was maxed out I called again and this time they went to fifteen hundred dollars.
- Collection Accounts will have a massive effect on your life.
Six months later, I could no longer pay for any of these cards. I didn’t tell my mother, I figured whats the worst that can happen? The worse did happen, the constant calling and harassment from the creditors wasn’t so bad, I often just laughed it off and hung up the phone. The worse came after college. I found a good job and made good money, I saved enough for a down payment on a car, but no one was going to give me a car with my credit. So shamefully I asked my mother if she would buy it under her name. That’s when, at the car dealership, she found out about my credit cards from four years earlier. It was around this time that I was beginning to learn about credit and FICO scores and how it can impact a person.
- If you have bad credit it means no more good deals on anything.
Three years later, at the age of 25 I decided to invest in a house, why not, everyone else was doing it. At the time the banks were handing out loans to anyone, no matter what sort of job or credit you had, I had a good job, but because of my credit my mortgage rate was 9.5 percent! Not to worry, I thought to myself, I will put up the down payment and in a few months I will sell the house at a profit. My payments were close to twenty five hundred dollars, I made around forty five hundred dollars a month with my job. I rented the house out and waited for the house value to go up. My tenant was paying twelve hundred dollars a month so thirteen hundred dollars was coming out of my pocket every month, but I can do this I thought, I can beat the system. No lousy collection agency is getting in my way, well they did get in my way. If I had decent credit my mortgage payments would have been around a thousand dollars a month, making me two hundred dollars profit every month.
And on it went for a year and still the house value remained the same, after about a year and a half it began to get lower and lower. Until I lost my job, the economy crashed and I couldn’t pay for the house any more, even with a tenant. The house went foreclosed and I was left with nothing.
- No Credit means depending on others for help.
I moved back in with my mother, I started looking for work, no one was hiring. Finally I found a job at a PO Box store, it paid almost eight hundred dollars a month, better than nothing I thought. It also had its perks, like unlimited mailing supplies I could use for myself. It was also rather boring and hardly a sole walked into the store, some days I would sit there for eight hours straight with no one walking in or out of the store.
- Its a hassle to clean your credit.
One day, at work, I decided to look up my credit. I went on to sites like freecreditreport.com just to see what it was like. And sure enough their they were, all my credit cards and department store cards, seven in all, with a Tmobile bill, showing, for around three hundred dollars I couldn’t pay for, after I lost my job, also showing on my credit was a Balleys membership I couldn’t pay for. And at the very bottom, in giant bold letters it said FORECLOSURE.
I fixed all this, got rid of all my negative and derogatory trade lines all by myself, without spending a single penny on paying any of them off. How you ask? I’ll break it down for you.
For starters I did work at a PO Box store, so the owner allowed me to have unlimited access to all the stamps and envelops I needed. If you were to pay for anything, it would be stamps and envelops.
Next I printed out 30 letters for each creditor, that amounted to 300 letters. One for each day of the month, I then carefully signed each one, folded them neatly into an envelope, stamped each one with three hundred stamps, and for 30 days straight I mailed a letter to the three bureaus. The letters basically said these credit cards do not belong to me, please remove them from my credit report. You can find sample letters online on the yahoo search engine. Every few days I would get a letter saying we investigated these trade lines and determined it belongs to you. But I was persistent, and sometimes I would call the creditors directly and threaten to sue if they did not remove these credit cards, I also sent out letters to the creditors asking them to show proof that I signed up for these credit cards.
Finally after a month and a half, I got a letter from Capital One, one of the credit cards I was disputing, it said we have investigated the following credit cards and determined it does NOT belong to you. Oddly enough Sam was at the store with me that day when I received the letter, and it just so happened to be the very first credit card I had signed up with him, as an 18 year old kid. I read the letter went down on my knees and cried. I couldn’t believe it, I had actually removed a negative credit card. In all it took me about three months to clean up all the negative trade lines, except the FORECLOSURE, which took about six months. The bank just refused to remove it, I asked them what benefit they had in reporting it, they just said, “sir you should be more responsible.” Eventually, with my persistence, they did give in and removed the FORECLOSURE from my credit.
- Never apply for a credit card unless under extreme circumstances.
Just to think all of it could have been different if only, I did not apply for that first credit card. But all was not lost and I did fix my credit, and eventually the economy did pick up, a little, and I was back to a better job making almost as much as my old job. Just be persistent and fight the credit companies and you will succeed.
And hang out with more responsible friends. Sam till this day, hasn’t fixed his credit. A month later, after all the negative trade lines were removed, I applied for a credit card. A Capital One card came in the mail with a $500 limit, I activated the card, then with a pair of scissors, cut it up into little pieces and tossed it in the trash.
Getting back on track and finally having a clean credit only took, ten years.