ERASE BAD CREDIT
A small square on my 10+ page credit card statement tells me, “If you pay only the minimum monthly amount on your due balance, you will be paid off on April 17th, 2033”. It was 2016.
When I was in the first years of operating my business, during the height of Hustle Culture, I often heard advice from entrepreneurs (successful and budding alike) that one of the best things you could do to secure funds to fuel your operation was to open up a credit card in your own name. If you maxed it out? Just transfer the balance to a new card. I was eager to follow their advice, and didn’t have much choice. My business had no history to trade on, so I was forced to secure funds by using my personal credit. The prevailing sentiment was that if you really cared about your business, then you needed to be willing to risk it all and put it in your name. I went for it.
I started first with a Capital One card, having learned that the bank was a fan favorite, as it would approve nearly everyone in exchange for taking the risk on your middle class ass. At the time, my credit was pristine due to the fact that I had never used it before, save for the student loan payments that my parents had been “helping” me with for years. I traded on this good credit. I hurriedly filled out the application, embellishing my yearly salary by tens of thousands of dollars to improve my odds of approval. The APR was 26.99%, which meant nothing to me at the time, other than making me wonder why they just didn’t make it a round 27%. Be it confidence or just unbridled naivete, I was sure that the interest wouldn’t affect me. I planned to keep my balance low and pay it off before the end of every month. In less than five minutes, I’d been offered $5,000, giving me a thrill only rivaled by substance use.
I tore through the money in less than a week by paying past-due bills. Afterwards, I searched for the next lump sum to fund my business. This time I traded on my good credit with eLender Kabbage. It offered a 20-something APR with aggressive repayment terms. I didn’t hesitate; I desperately needed the money to pay off a vendor who, rightly so, had been wondering where their money had been for nearly two months.
This cycle would continue for years: the constant hamster wheel of me borrowing money to fill orders for my largest customers, those customers paying me late, and me getting behind on paying my suppliers and creditors. The borrowed amounts grew higher and higher, and the time taken to pay them off grew longer. Although all of the email and text reminders that I was behind on payments and the incessant phone calls from collectors scared me, I opted to avoid addressing the problem–and I didn’t know how else to keep my business going. In turn, my credit took a dive to the low 400s, my on-time payment history ruined.
In business terms, I was insolvent. In everyday terms, I was broke. I attempted to try and borrow my way out of debt, always a fantastic idea, but the buck had already stopped. It would take years of slowing down on new business, saying “no” to what seemed like good ideas, and finally addressing my problems head-on to fix my personal finances. It took debt consolidation, negotiating amounts due with collectors, and paying out of pocket from my 9-5 job.
I felt like a failure. I had worked so hard, sacrificing an easier life for the better part of a decade, all to hopefully “make it.” Instead, alI I was left with were tens of thousands of dollars in debt. Real entrepreneurs, I thought, didn’t fail. I found it hard to share with people just how bad things had gotten, knowing that my friends and family had largely made prudent, safe financial decisions with practical career paths. How could they relate? It was a shame that I carried alone. Ultimately, bankruptcy became my only option. I hated the idea of it, but I had no choice.
In 2018, I found my way back to my hometown, taking the first stable (if underpaid) job I could find. I crashed with my folks in an attempt to pay off my debt and get the creditors off my neck. I found a side hustle on the weekend with an old friend, moving furniture and throwing out my back. The extra cash helped to pay off some of the debt, but it was merely drops in the entire insolvent ocean. It felt impossible to get back to square one, and maybe it was. With student loans still looming over me on top of all the debt accumulated from borrowing for my business, I felt like there was no way to get out.
One morning on my way in to work, a bright, Coca-Cola-red sign emerged at a stoplight:
ERASE BAD CREDIT!
If only. The sign made me furious. I was working 70 hours a week without paying rent, and it still wasn’t enough to erase my bad decisions. What the sign offered was physically impossible: an instant fix, a clean slate. While it takes only one or two missed payments to do major damage to your credit score, and thus your financial wellbeing, it takes years and years of on-time payments to rebuild your bad credit. And even if you do manage to patch it up, all of the trauma and shame remains. You still carry all of the scar tissue, even when you no longer carry a negative balance.
Even worse, that shame is reserved only for the individual, not the institutions. Lenders have notoriously been given bailouts by the American taxpayer, and if they file for bankruptcy, it’s never their fault - it’s the market’s, or they were “over leveraged.” When an individual can’t pay their bills, though, they are a deadbeat.
After months of on-time minimum monthly payments, I received an email from Capital One: “Congratulations! We’re extending your credit limit by $2,500!.” Despite everything that’d happened, I felt that same, original thrill. I I burned through the money in record time.
I’ve painted my sign in a bright red color, the kind that can strike panic in your heart. Panic like you can feel when you’re overdrawn by $3.27 and get charged a $25 fee. Panic like you can’t ever live a peaceful life, now that you have persistent creditors. Panic like you have no value.