Our story with bad credit began two years after we were married when we wanted to begin a family. Unfortunately, we battled with infertility for over 11 years before we finally gave up the fight and adopted our wonderful, beautiful daughter. However, during those 11 years we managed to accumulate over $16,000 in medical bills that insurance did not cover. During these years, we also ran up approximately $21,000 in credit card debt paying for medical procedures that insurance would not cover. By the time we adopted our daughter, we were skipping credit card payments, making late vehicle payments and two months behind on our mortgage payment. Our credit score went from at 780 to a 620 within a year and we were struggling to make the minimum payments.
Fortunately, before our credit score completely tanked, we applied for a home equity loan for $30,000 to consolidate the larger debts. That left us with $7,000 in debt in addition to the payments we were past due on our first mortgage and our car payments. We had to borrow against our 401k account to pay the remaining credit card and medical bills but not before our credit score sank to 560. Our credit cards were canceled and our accounts were closed including the home equity line but that was maxed to the limit anyways. I had given up hope of ever getting out of debt and improving our credit scores and then with the recession causing my husband to lose hours at work, I was not sure if it mattered because we were facing bankruptcy.
Rather than giving up, we decided to take what we had and continue trying to improve our credit score and our personal finances. My husband turned his hobby of woodworking into a small business by selling his creations at the flea market, online and at craft fairs. I started working online by writing for Associated Content to make extra money to pay toward our debt. This added an extra $300 to $400 per month to our budget to pay bills. To save more money, we sold our Jeep Cherokee and purchased a minivan that we could afford without financing the purchase price adding another $365 to our monthly budget to help reduce our debt.
By setting up our mortgage payment on automatic draft, we have managed to make all payments on time for the past 12 months on both the first mortgage and the equity line. We have also paid down the equity line to $21,000 and managed to live without credit cards for over two years. We keep a small emergency fund for unexpected expenses and cut expenses as much as possible by using coupons, bundling services, shopping around for better prices and living below our means. I checked our credit scores and we have been able to raise them to 620 and 590 during the past 12 months. It is slow; however, with hard work and patience we hope to keep raising our credit score until we are in a better position than where we began over a decade ago.
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