Success Story: Nancy Gets Her Credit Back on Track. And You Can, Too.

If you’ve been through serious financial problems like bankruptcy or foreclosure, you no doubt experience moments where the future feels very bleak. You may feel like your credit is ruined forever. Or you may be terrified, and afraid to ever sign your name to a credit application again.

Those feelings are perfectly normal, but not completely rational. Over time, you can rebuild good credit. And if you want to buy a home or car, you probably should.

[Featured Tool: Get your free Credit Report Card from Credit.com]

Recently, I spoke with Nancy Rae Evans, who shared with me the progress she’s made on improving her credit after bankruptcy. I asked her to let me share her story, because it illustrates perfectly some of steps almost anyone can take to get their credit back on track. I hope you’ll find it helpful if you’re struggling to recover from a credit setback.

[Article: New Credit Score Could Help Millions, Eventually]

For nearly ten years, Evans worked in the mortgage industry, and prior to that she worked with businesses, helping them manage their cash flow. As a commissioned salesperson, she experienced firsthand the challenge of trying to budget on a roller coaster income. Without a steady paycheck, she found herself turning to credit cards when business was slow, and then she’d scramble to catch up when the checks came in.

Evans says she wasn’t wasting money on frivolous purchases. “I am good at self-deprivation,” she laughs. “I got into credit card debt spending on my business, not my possessions.” She often justified business expenses, even when she didn’t know how she would pay for them. “It’s almost a seductive thing,” she notes. “I’d think, ‘This is the magic bullet (to help my business grow).'”

[Featured Product: Looking for bad credit credit cards?]

But there was no magic bullet, and in 1999, she filed for bankruptcy, after putting it off for three years. After that, “I didn’t use credit for years,” says Evans.

Last year, she got serious about rebuilding her credit. She was already had a good handle on her spending. She had become a certified personal finance coach, and had launched her business, Embracing Money, to help others get the same clarity with their finances. She knew how to handle ups and downs in her cash flow. But she also knew that she needed to take the plunge and get back into the world of credit.

Back to the World of Credit »

Image: sovietmole, via Flickr.com

Back to the World of Credit

Evans knew that one way to rebuild her credit was with a secured card, but she decided to take a more local approach. She approached a nearby credit union and asked them if they would give her a secured loan. They did, and she was able to get a loan for the same amount as she deposited with them.

After 4 months of paying that loan on time, she and I discussed her next step. I recommended the Orchard Bank credit card because applicants may be offered a secured card or an unsecured card, depending on their credit qualifications. She applied and received a low balance unsecured card, which she also managed carefully.

[Featured Product: Get a free trial credit score]

Last month, she was able to get a traditional unsecured card. “I was pleasantly surprised,” she says. “I went with the one that has gas and groceries rewards, though it’s scary to me when people use their cards for those types of purchases.” She knows that using credit cards to pay groceries can be risky if you don’t pay the balance in full and is careful to keep her balances low this time around, and to pay them in full.

Evans is now focused on monitoring her credit reports and scores. One of her credit reports shows no negative information, but she’s still working on getting the others straightened out. She finds the process frustrating. “I have a better than average understanding of how it works, but I still have trouble getting things corrected. I can only imagine to someone who has no clue whatsoever how frustrating it must be.” Nevertheless, with a good grip on her spending, and credit scores that are improving, she’s on her way.

[Article: Bizarre World of Business Credit Cards Trips Up Credit Expert]

And she hopes her experience will help her clients avoid the same mistakes. “I assist people in finding a way to meet all their needs, now and in the future. It’s got nothing to do with the amount of money,” she observes. “It’s knowing where it’s going and spending it on what you really need.”

What can you learn from Nancy’s experience?

1. It takes credit to rebuild credit. If you hope to make any purchases in the future involving credit (such as buying a car), you will need to demonstrate that you can handle credit responsibly now. You’ll need credit references to do that.

2. A secured card can be one of the easiest ways to reestablish your credit. Once you have one of these cards under your belt for at least six months, you may want to test the waters to find out whether you qualify for an unsecured card.

3. Before you focus on building credit, make sure you have a solid spending plan, and that you are saving for short and long-term goals. Otherwise, you could find yourself back where you were before your credit crisis.

[Identity Theft Resource: Free Identity Risk Score and profile from Credit.com]

At publishing time, the Orchard Bank Classic MasterCards are offered on Credit.com product pages and Credit.com may be compensated if our users apply for and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment.