Hi there. I'm 22 years old, and I graduate from college in two weeks. I made some financial mistakes throughout college (because of the fact that I am a full-time student and don't make any money), but I have recently rectified these mistakes, and I am wondering how they will affect me. Here is my situation: Altogether, I have only ever had 3 credit cards, each for a store. I got them all about 3 years ago, and I had about $1000 in debt on each of them. Stupidly, I neglected to pay them for months upon months, because I was a full-time student, and I only worked in the summers. I made the minimum payments in the summers, but other than those three months of the year, I had no money to pay anything at all. (They really should not give credit cards to students!) Anyway, the debt never went down at all because, even though I made a few payments in the summers, the late fees from all of the other months of the year and interest pretty much canceled out the payments. And all of the missed payments caused my credit rating to plummet. When I checked my credit rating, I was HIGH RISK. Realizing what an idiot I had been and that this kind of thing actually matters, I explained the situation to my parents, and they helped me out tremendously. They paid off all three cards in full, after I promised to pay them back $100 a month once I graduate. As of today, I have no debt at all! All of my cards are paid off completely. (No student loans either, full academic scholarship to college.) It feels great to be out of debt, but I'm wondering how much all of the bad marks on my credit report from the previous missed payments are going to hurt me. I certainly learned my lesson, and I'm definitely not going to screw up like this again. Here are my main questions: 1) In July, I will be moving to a new state for graduate school. (Don't worry, I received a GENEROUS stipend for grad school, so I'm actually going to have an income for the first time, that is more than a lot of college graduates make at their first job.) However, I'm going to have to apply to apartment complexes, and they're going to check my credit. Am I going to be denied because of an awful credit rating, or am I going to be approved because I have no debt at all? Basically, even though everything in the past was bad, since it's now settled, does it look okay or not? 2) Since I'm now getting on track with my credit and bills, and I'm going to be having a real income for the first time in my life, will I still be plagued by my financial stupidity in college, years down the road? I know that these bad marks will supposedly stay on my credit report for 7 years. Will they really go completely away after that? As long as I don't mess up from this point forward, am I completely screwed for life, or do I have a chance or actually establishing excellent credit in the future? Thanks for your help!!
Pull your own credit reports and tell us what is on them ... use annualcreditreport.com. If the cards aren't closed, use them a little and pay them. You need to start building new credit. You may need to find a cosigner for your apartment, or you may need a roommate situation where you aren't on the lease, or you may need to rent from an individual landlord or a small complex that doesn't care so much about credit. It may not be easy. As for rebuilding, you've got a bent propellor, but your credit ship is far from sunk. You will need, however, to choose carefully where and when you apply for credit ... applying for credit will generate a hard inquiry that will cost you FICO score points, and so you don't want to waste apps or hard pulls on cards you can't get in your situation. Do some research to know who might approve you and for which products ... for that you will need to know your scores, and to get your scores you will need to buy your reports from the big 3 directly rather than get the free annual products. The usual credit ladder is fuel cards, then specialty retailers like radio shack or a jewelry store such as Crown, then clothing stores (limited, etc.), then department stores, then major credit cards, with Amex as the cherry on top. At one time Chevron offered bad credit risks a rebuilder card, but they've recently changed their credit card banker. So all bets are off over there. But fuel cards are the easiest starter (or in your case restarter) cards.
Cool, do you know how long I have to wait to do that, or how I can do that? I mean, I know you can dispute negative marks that are mistakes, but obviously they are correct that I didn't pay for a bunch of months... So how can you dispute something that is accurate?
Thanks so much for the help! I can get my parents to cosign the apartment. Is it still okay to submit my credit information for them to see? If I have bad credit, but I have a cosigner, will they let me sign a lease? Thanks again for all of the advice.
This is very much creditor-dependent. It costs money and can create confusion to keep a former debtor's name in an active database. At some point, every creditor is going to take a former debtor's name out of their active database ... the creditor may still have that information in a different database or on older backups, or even in hardcopy or microfiche or imaging systems ... but the bottom line is it won't be available to the worker who is tasked with verifying things for the CRAs (to the extent that it's even done with the intervention of a worker ... it could be automated verification, and again if it's not in the active database, it might as well never have existed). This means that for many creditors you will be able to knock a TL off your report after 6 months ... a year, two years, who knows? Keep in mind there are a couple of risks that come with success in this approach: lower score due to loss of average age of TLs, and the deadly ghosthood that can result for a person out of their college years with no TLs whatsoever on their credit reports. A great many potential creditors won't touch a ghost but would finance you even if you had bad credit. Fear of the unknown...
