It all started with a discount.
I was just 19 years old when I was shopping and saw a (probably hideous) dress that I liked. The store was offering a discount when you signed up for a credit card. I applied at the register and was very embarrassed to be declined.
I didn't really think about it again until a letter from the credit bureau came in the mail a few weeks later. It listed all the many reasons my poor credit was unacceptable: delinquent payments, high debt to income ratio, charged off accounts, repossessed cars, and more.
Since I was living at home with my parents, had paid cash for my 1972 Oldsmobile, and had no credit cards, this was all super-confusing. So I did what any young person would do in the '90s: I fired up AOL to find out some answers.
AOL led me to the three major credit reporting agencies (Equifax, TransUnion, and Experian) and I ordered my report. Seeing it all there in black and white, a pattern began to emerge. Some credit cards that I had supposedly defaulted on were to stores where a certain family member loved to shop. The car that was being repossessed was same model that this family member drove. There were even utilities in my name at their address. When it was all tallied up, I was in the hole just under $250,000.
Did I mention that I was making $5.15/hour at the time?
I wish I could say that I was shocked, but the fact of the matter is that this was not surprising behavior. My relationship with this person had been toxic for a long time, and I had witnessed them do the same to others. I just didn't think it would happen to me. I was young and dumb and I buried my head in the sand, hoping it would all just go away.
I honestly didn't know that much about money and credit or how it worked for and against you. My parents always had difficulty managing money and paying bills. We lived in a very large house in a very nice suburb and had no furniture in most rooms. We had three, sometimes four cars, and I would come home from school to find the electricity shut off.
They constantly fought about money and lied to each other about spending, often making me complicit in their bullshit. I was asked to throw bills in the garbage so the other wouldn't see them, or hide new purchases. Let's just say that the personal finance lessons being modeled to me were less than ideal. To me, money was something that just showed up sometimes and it was our job to use it all up until it was gone.
So of course, when I was finally approved for a credit card, I maxed it out. Why bother being responsible when I was already doomed? I spent thousands of dollars on that card and literally had nothing to show for it. Not even a cool leather jacket or great memories of Lollapalooza or whatever.
I wasn't able to pursue college because my family made too much money for me to qualify for any kind of loan or grant, but there wasn't any money available for them to help me, either. Private loans weren't an option because of my poor credit rating. I took a few community college classes while working full-time, but it just didn't work out for me.
So here I was in my early twenties, living paycheck-to-paycheck with no hope of getting out of the situation.
The phone calls were incessant. I hated even looking at the mail. It felt like there was no way to get ahead, and all I could do was wish it away. This went on for an embarrassingly long time. I was now 24 years old and just realizing that I was actually going to have to deal with this.
I contacted a lawyer who explained that I would have to file charges against the person who committed the fraud. Because of the nature of the crime, there was no way to distinguish myself as the victim as I could have benefited from the fraud in some way (like the utilities). I honestly didn't have the money or the chutzpah to do that, so I just stubbornly decided to take care of it myself. Somehow.
At this point, I had recently been laid off of a job and was living alone in a tiny apartment. All I had was time, and I spent most of it at the library learning about bankruptcy, how to correct errors on your credit report, and how to fix your finances for good. I learned that negative items expire from your record with seven years of inactivity. My inability to deal actually worked in my favor and a few items "fell off" my credit report.
Now there was just a measly $175,000 left to clear up. The rest of the items I either tried to dispute or work out a deal.
The disputes took months; years in some cases. I did learn early that credit companies want your money and they'll take it any way they can get it. I was open about my inability to pay what they were asking. Most creditors settled for less than 1/3 of what was owed. When you default on your debts, the creditors sell the balance to collectors for pennies on the dollar. As long as I was offering more than that they were happy to accept it.
I hated making payments towards balances that I didn't have the fun of running up. In the meantime, I learned to shop smart, plan a menu, get the most out of everything I own, and basically embody the old Depression saying of "use it up, wear it out, make it do, or do without."
Right around this time I starting dating a man who I knew I was going to end up with for the long run. The thought of saddling him with this debt and starting our life in the hole made me feel awful. Now I was even more motivated.
Empowered by my new knowledge I made a game of it. How much of this debt could I ditch and how fast? It turned out that I could work my butt off and deny myself anything but the most basic funtimes for a few years and come out on top.
I hustled as a server and bartender and took every possible shift I could manage. Being at work every evening made it impossible to go out and spend money. I had many a staff meal at the bar. I learned to hand-wash and line-dry my clothing. I learned that one quality item that costs twice as much is worth more than the crappy version on clearance. I ate a LOT of oatmeal.
In total, it took me five years to manage a quarter million dollars in debt. Having the final item struck from my credit report was an extremely time-consuming and expensive weight lifted off of my shoulders. While I really, really wish I didn't have to deal with all of this, I don't take for granted the lessons learned along the way.
Using the knowledge I gained through my awful experience, I have been able to guide my family to success. My husband and I bought and paid off a house in three years, sold it for a profit, bought our dream house in Pittsburgh, bought two new cars, and stayed debt-free through the whole thing. We have recently relocated to the west coast and are living on a single income as a family of four in one of the most expensive cities in the country.
Whether you've made your own poor choices or had others' poor choices thrust upon you, there is a way out of personal finance hell. The calls won't stop and the bills won't take care of themselves, but you can change your future by correcting the past.
There are a million finance bloggers handing out free advice online. Find one who speaks to you and learn a few things. Get a book from the library and take notes on debt payoff. Get your credit report and look it over, you might be surprised at what you find. I sure was.