From 0 To 850: How Rebuilding Your Credit Score Can Change Your Life

In the past, having a bad credit score didn’t matter all that much. The reason for this was that the economy was different in the past. Instead of relying on credit to buy everything from holidays to sofas, people used to dip into their savings whenever they wanted to make a big purchase.

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Of course, all that began to change after the Dotcom bubble burst in the early 2000s during the presidency of George Bush. The Fed held interest rates super low, meaning that there was more incentive for people to take out loans. Not only that, but the banks saw an opportunity to extend credit to more people than ever before, thanks to the rising value of homes. This led to a credit binge – something that individual households and the economy as a whole is now dependent on.

The problem is that the more indebted people became, the worse their credit score got. Credit rating agencies soon realized that you couldn’t keep piling debt onto people with fixed incomes and expect them to pay it back. As a result, they started to toughen up. At the same time, banks got a lot tighter about lending. They were worried that their capital would be wiped out, thanks to the fact that they had lent to so many people before the financial crisis who didn’t have the ability to pay. And so they devised a plan to make it harder for small businesses and households to borrow.

For people with bad credit, this was seriously bad news. They were unable to get loans for things that they needed, like starting a business or buying a car. Bad credit used car loans just weren’t available yet. As a result, they wound up missing out on major life milestones.

So how can they fight back?

Get Competitive

Back in 2010, Brian Hays from Texas was a busy man. He’d just set up his own engineering company and wanted to merge with another firm. Unfortunately, the credit rating companies didn’t take too kindly to his desire for a merger, and so they pummelled his credit score.

Seeing that his score was tanking, he took drastic action. He and his wife – who also had a bad credit score – started a competition to see who could raise their rating the fastest. He managed to go from 550 to 760 in just about a year. This allowed him to take out extra loans to finance his businesses.

Add A Touch of Hope

The recession had a serious detrimental impact on Karen Baker’s marketing company. She experienced a fall of more than 50 percent in her income during the recession period and quickly started blowing through her budget. Over time, her debt exploded, and she ended up owing more than $25,000 to the bank.

She realized that she could run a business and have massive amounts of personal debt and so she decided to take action. Every week she reviewed her spending and found ways to improve her score. Now she owns a house of her own, thanks to getting her FICO score over 650.

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