Hiding the car from the repo man and renting a private mailbox so he didn’t have to provide a home address were just two of the ways Dan Nainan was trying to deal with his debt a decade ago.
But the collectors were persistent.
One showed up at the mailbox rental location and told the owner of the business that Nainan’s parents had been in a car accident and he needed to get in touch with him immediately to donate blood. Another time, Nainan returned from a trip to learn that the repo guy had found out where he lived and had been banging on his door. He has since learned the first collector’s tactics were illegal, but at the time he didn’t know his rights.
Now a successful comedian, Nainan can joke about his past credit problems. “My credit card company had a hit man after me,” he quips. But at the time it was pretty serious – and scary.
Nainan had run up a considerable amount of debt “buying stupid stuff trying to be like your typical materialistic American,” he says. He was having trouble managing his debt and his credit scores were terrible.
“I really screwed up my credit,” he admits, saying his credit score was “probably a negative number.”
But in the process of getting back on track financially he educated himself about credit, and today his scores top 800. Here’s how he did it and what he learned.
You’re Only 7 Years Away From Good Credit
Nainan’s scores didn’t change overnight, but as he started catching up on his bills he saw improvement, bit by bit. “Slowly the bad things fell off my file,” he says. He points out that almost all negative information will be removed after seven years, though there are steps you can take in the meantime to start building better credit now.
It’s Crucial to Monitor Your Credit
One thing Nainan is adamant about is taking advantage of AnnualCreditReport.com to review his credit reports, and taking advantage of opportunities to monitor his credit scores for free. (One way to monitor your credit scores is with a free Credit.com account. In addition to your scores, you’ll get a personalized action plan for your credit.)
Mistakes Can Be Fixed
Because he is vigilant about monitoring his credit, Nainan discovered two items on his reports that didn’t belong to him. He disputed them by mail with the credit reporting agencies, and they were removed. (Here’s a step-by-step guide to disputing credit report mistakes.)
Being Nice Goes a Long Way
When he was digging out of debt, Nainan reached out to creditors and collectors to work out deals to get back on track. When he did he was friendly and polite. More often than not he found that kindness paid off and the companies he owed money were willing to work with him as he repaid debt. “They are dealing with the worst of humanity,” he says.
Make Sure Bills Get Paid
Nainan now travels around the world as a comedian and speaker, and doesn’t want to jeopardize his good credit by accidentally missing a payment. So he has set up “autopay” for all of his bills. No matter how busy he is he knows his bills will be paid on time.
Watch Your Limits
As a result of his travel, the balances on his credit cards can appear high, even though he pays them in full. Knowing that one of the important factors in many credit scoring models is the “debt usage ratio” – which compares credit limits to the balances listed on the credit reports – he has successfully asked his issuers for higher credit limits.
He offers this tip: When you call your card issuer, the representative may ask what credit limit you’d like. He suggests you be vague and try to get an idea of what they are willing to offer. You don’t want to ask for too little, but you also don’t want to ask for too much and get turned down.
Avoid Unnecessary Inquiries
Recently, a bank was trying to get him to open a checking account. He asked them if doing so would create a hard inquiry on his credit reports. Although a single inquiry doesn’t drop credit scores significantly, he’s careful to avoid unnecessary ones.
Nainan has turned his bad credit into good credit and become an expert in the process. He’s since helped friends with their credit. And while he knows he won’t likely see a payoff from boosting his credit score even higher, he may just go for it. “It’s just fun,” he says.
More on Managing Debt:
- How to Pay Off Credit Card Debt
- Understanding Your Debt Collection Rights
- The Best Way to Loan Money to Friends & Family