August 25th, 2011
Community Karma: Dana Gets Some Credit
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**This is the final installment in this summer’s “Community Karma” series, which feature people just like you sharing their financial stories, personal money tips, how they over overcame hardships, and more!**
It all started about eight months ago. Dana Turscak was sitting on his friend Seth’s back porch in Greenville, South Carolina. Dana had his eye on another house just across the way. “You know, I wish those people would move out,” he said. “I would buy that house.”
“Well,” Seth said, “That house was just foreclosed on.”
Dana’s heart sank. “My credit is destroyed. There’s no way I could get that house.”
So he forgot that dream and went back to his apartment where he and his wife Destiny lived with their 3-year-old son. Soon, he received a phone call from Seth’s mom that would change their lives.
“We’ll buy the house,” she said. “You move in and focus on working on your credit.”
It was a once-in-a-lifetime opportunity and a completely selfless gesture that Dana couldn’t pass up, so he took her up on the offer and moved his family into the house that he happened to see from his friend’s porch. But Dana had a long way to go with his credit. At the time, his credit score was in the poor credit range at 520, and it was in serious need of attention. So he started the process of credit repair and quickly became a credit score-monitoring fanatic.
He’s still working on his credit, but in the meantime, he shared some of his credit repair steps with Credit Karma. In the process, he’s become what we like to call a “Credit Karma Superfan.” Read on to discover the route he’s taken so far and how Credit Karma’s tools have helped him along the way.
He conducted a credit check-up.
The first thing Dana did was to get a copy of his credit report. From there, he took a close look at his credit to clean it up by paying off old debts. When a friend recommended CreditKarma.com to him, Dana jumped at the chance to closely monitor his credit score and learn more about credit health.
Tip: You can get a free copy of your credit report from AnnualCreditReport.com once a year from each of the three credit bureaus. Spread them out over the year so you can check your credit report every four months.
He found little ways to build credit.
Dana knew that with his credit score of 520 he couldn’t get approved for an unsecured credit card. And so he took Credit Karma’s recommendation and applied for a Capital One Secured MasterCard.
A secured credit card typically guarantees approval because it’s backed by a security deposit that the cardholder provides. Essentially, the security deposit becomes a safety net against any potential default on the card. A secured credit card was Dana’s best bet to start his credit-building process.
Tip: Make sure to read the fine print, especially the APR and any additional fees, of each card before you apply.
He monitored his credit score for fluctuations.
Dana started using his card right away to build his credit. But when his credit score dropped, he wondered what the cause was. A quick review of his Credit Report Card revealed that his credit card utilization rate was a whopping 76%. Open credit card utilization is the total credit card balances divided by total credit card limits. Because Dana’s secured credit card had a low limit (set by his security deposit), his utilization skyrocketed with the $150 he charged. From then on, he started to monitor his utilization rate closely.
Tip: Know how much 30% of your credit limits is, and keep your credit card balances under that amount.
He kept up with good credit habits.
Six months into Dana’s new lease on his credit life, he received an email from Capital One, his credit card issuer. Due to his responsible payment habits on his secured credit card, they increased his credit limit by $100 unsecured, meaning Dana didn’t have to put up another security deposit. In just six months, his credit score jumped 65 points to 585. His credit limit increase was prompted by his good credit card usage and reliable debt repayment.
Tip: You can request a credit limit increase, but just remember to ask your issuer first if it will cause a hard inquiry on your credit.
He continues to research each move.
Since Dana started working on his credit, he’s received a lot of credit card offers. But all of them came with extremely high interest rate offers. When he was ready to get another credit card, he did all the research himself. He started combing through Credit Karma’s Credit Card reviews section, paying special attention to the Approval Odds for each card he was interested in. Eventually, he found the right one: the Capital one No Hassle Cash Rewards Card. Now, he could continue building his credit while getting cash back for his purchases.
Tip: Check out the Credit Simulator to see how your credit score could be affected by actions such as opening a new credit card account or increasing your credit limit.
The Bottom Line: Dana’s still working on his credit, and he says he owes a lot to his wife, Destiny, for “helping keep the finances straight.” They’re working on their credit together in hopes that, one day, they’ll own their home. For now, Dana has his eyes set on a goal for this year: a credit score of 650.