Editorial Policy

Expert Q&A: Rebuilding Credit, Fearing Debt

Erica Sandberg

July 11, 2011

QDear Erica,
I’m working on repairing my credit. It had been ages since I received solicitation letters for credit cards; but over the past few months I began receiving them. I recently applied for a card, and I was actually approved! Now that I have it, I’m afraid to use it. I want to, but my fear is that I’ll fall into the trap again of getting into debt. It’s difficult to live on only a debit card. Why are these card companies soliciting my business again? All advice is appreciated. — Ned

ADead Ned,
I’m so glad you are on your way to a new and improved relationship with plastic! Here are the two basic ways to repair credit wounds:

1. Wait for time to heal the past. Almost all negative information on a credit report will drop off after seven years. Once it’s gone, it won’t reappear, and no one will ever be the wiser. But even before that happens, the older the derogatory item is, the less affect it typically has. Recency, severity and frequency of problems matter a great deal to most people and companies looking at these reports. Consequently, an account that’s been languishing in collections for five years tends to be less damaging than one that was sent over a month ago. And if it only happened once and the balance was low, the impact is also not so bad. Ask Erica

2. Actively change the future. This is what you seem to be doing right now. You just applied for and received a credit card. As you use it responsibly from this point forward, you will be creating a positive credit history that will overshadow the negative one from the past. In fact, the more good credit actions that you make and that are recorded, the faster your report will recover.

There really is no magic to the credit repair process. You can’t force the hands of a clock to move any quicker than it does, and you can only do so much when it comes to credit use. Just charge, pay and wait. After a year or so, check your reports and FICO scores. I have no doubt that you’ll see a major difference.

As far as why you weren’t receiving the promotional letters before and are now, I can only speculate. My best guess is that time did, in fact, do its thing. Whatever you did to hurt your credit report has now became old enough for the credit card issuers to not care so much.

Something else to consider is that each company has its own policies about when and to whom to offer lines of credit. Maybe you qualify for a product that fits your profile — someone who wants to turn their credit life around. There are certainly a lot of people in your position out there, and though they may have messed up before, they are ready and able to start again on a better foot. Let’s not forget that credit card companies need cardholders. Without them, they have no business, so there is considerable competition for good customers.

To address your fears, I say keep them close to you. Identify what led you down the wrong path before. What was it — not enough emergency savings and then you “had” to rely on credit to pull you though? Maybe you just took your eye off the ball and spent a little too much here and there, allowing the balances to slowly creep up. Once you know what the problem was, make a commitment to not make the same mistakes again.