A couple of years ago when Facebook first started and it was exclusive to college students myself, and a group of friends started a group called “The 700 Club”. We all had one goal in mind, doing whatever it took to get our credit scores above 700 and having to develop healthy money habits to help them it there. Well, if that endeavor had of been a success I wouldn’t be writing this post right now. Yep, I failed. On March 25th, 2015 when I was just starting Broke on Purpose I decided to check my credit score and pull my credit report to see how was doing. Based on our financial situation at the time I can’t say that I was too surprised to see my credit score chilling at a solid 662. Many people would be okay with a credit score in this range, but to me, I knew it meant that I’d drop the ball on being financially responsible. Using some of the things I learned in our good ol’ 700 club I made changes in my financial habits that would lead to my score being raised almost 90 points in just ten months!
Your credit score is based on an algorithm encompassing five different categories. The amount of debt you owe, the type of credit you have, how long it’s been since you started using credit, how much new credit you’re going out and obtaining, and your overall credit history. All of these factors influence each other and make up the almighty credit score. The simple act of closing a credit card could cause your credit score to fall because you’ve now altered your debt to income ratio. I didn’t get bogged down in all the technical jargon when approaching my credit score. I just focused on one thing, in particular, paying down my debt.
I monitored my credit through Equifax. I signed up for a monthly subscription service where I paid $19.99 per month for unlimited access to my credit report and credit score. I also took advantage of putting a lock on my credit report so that no one could check it without my permission. With my credit report in hand, I then made a list of all my debts, double checking to be sure they were actually mine and then making a note of the balance owed. I then set up the debt snowball, which I show you how to do in my ebook as well as in this post.
After setting up the debt snowball, I put all my efforts into paying down my debt. I got rid of all my credit cards except for one to use in extreme emergencies and listen that Chloe Marcie bag going on sale does not constitute an extreme emergency. If there was something I needed to purchase I did it with cash or with my debit card, this kept me in check and kept me humble.You start to rethink things when what you’re buying is coming directly out of your bank account our cash is leaving your hand. When my friends would ask me to go out and do things I knew I couldn’t afford I’d simply reply “I’m on a budget.”
To read about how we paid off almost $30,000 in debt last year check out this post!