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Credit Counseling Testimonial
A Personal Look at Credit Counseling
I’ve always been a very independent person. Being an only child, I got used to doing things on my own. I was also the first in my family to take many of the steps I did, such as going to college. Graduating with my bachelor’s degree only affirmed my beliefs that I did best when I trusted my own instincts.
Being hired into my first professional position right out of college gave me that much more confidence, and I soon began to get a glimpse of the life I’d always felt I was destined to live.
I had obtained a credit card soon after graduating, and I didn’t worry much about using it. The minimum payments were very manageable with my salary, and I always made them on time. Soon I was receiving more and more offers in the mail for additional credit cards, many with enticing 0% interest introductory periods. I reasoned that if I had a few credit cards, I could alternate using them and keep all the minimum payments very low. I even began closing my older accounts, transferring the balances from those cards onto newer ones to take advantage of the 0% interest rates whenever I could.
It took me a while to find out that I was in trouble with my credit. First the mail offers dropped off; then I tried to get a loan to buy a new car, and that’s when I got the news. My credit score was too low for me to be approved for the car I wanted. I knew I’d missed one payment a few months before. I was paying on five cards now and I’d just forgotten about the statement under some other mail.
I thought maybe I had too many cards, so I transferred the balances from two of them onto the others and closed those accounts, but when I tried to qualify for the car loan again, my score had actually gone down!
One of my co-workers recommended credit counseling, a step I resisted at first. I’d always done so well making my own way in the world, but I had to admit that whatever I was trying was not helping. I found out there was a credit counseling service at my old college and I decided to give it a shot.
I felt comfortable right away with my counselor Jeanie. She looked at all my credit card statements and then asked me to describe how I’d been using my cards. I was surprised to learn from Jeanie that closing a credit card account usually lowers your credit score, at least temporarily, because it sends a message to the credit bureaus that you’re in trouble with your debt.
She also explained how transferring the balances from my closed accounts onto my other cards had pushed the amount of debt I was carrying over 80% of my credit limit on all my cards, which was another factor that could lower my score.
Jeanie and I discussed my options, one of which would be to go onto a debt management plan, or DMP, by which I would make payments directly to the credit counseling service and they would use them to pay down my credit cards. However, because I wasn’t having trouble
making my payments, she didn’t recommend that.
Instead, Jeanie and I worked out a plan to raise my credit score. I would make large payments to each of my three cards. I would work to get the balances on each below 50% of my credit limit. I wouldn’t open any new accounts or close any of my old ones. She explained how my habit of transferring balances and closing older cards was keeping me from establishing long enough payment histories for the credit bureaus to judge my credit worthiness
I took all of Jeanie’s advice, and four months later had met all of the goals she’d set out for me. I applied for the car loan again and was easily approved and pleasantly surprised to find out just how much my score had improved.
Today, I continue to follow the lessons I learned from Jeanie. I’ll be looking at buying a home soon, and it’s nice to know that my credit is right on target for the kind of loan I want, thanks to my credit counseling sessions. I drop in to say hi to Jeanie every now and then. I’m still one of the most independent people I know, but in a lot of ways I think of her as the big sister I never had.
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