Anne Harrison knows what it’s like to be caught in a credit crunch. “I hated to hear the phone ring,” says Harrison, 31, who juggles the roles of wife, mother, salesperson and student and student in Roswel, Georgia. “I was afraid it was one of my creditors with demand for money. In the meantime, my bills were sitting in the drawer unpaid. I knew that if I paid the rent, I wouldn’t have enough for food.
How did Harrison wind up in this situation? “My husband and I wanted a change,” she recalls. “We had been living in New York [in 1994], where everything is so expensive, and we’d heard wonderful things about Atlanta. Unfortunately, after we moved, my husband, a former hospital manager, couldn’t get a full-time job for several months, and my own income declined because my commissions from selling computers were down. We had a second child and the next thing I knew, we were $20,000 on debt.”
The Harrisons sought help–and found it. From late 1995 to early 1998, they knocked down their debt load from $20,000 to $7,000. Anne’s new job allowed her to make more money, which she funneled into larger credit card payments. She also stopped using her credit cards completely. “By the end of the year, we’ll be debt-free,” Anne says. “In addition, we qualified for a mortgage and are now living in a lovely four-bedroom house in a desirable area.”
IT’S SERIOUS BUSINESS
Yes, it is possible to dig your way out of debt if you know how to wield the shovel. Certainly, the Harrisons are far from unique. Millions of people rely on credit to help them buy homes, cars, vacations and more. Inevitably, even the most conscientious can encounter job losses, medical emergencies and other unforeseen circumstances that make repayment difficult. Late payments or defaults will be noted on credit reports that follow you around for years, squeezing your standard of living; so, it’s imperative to convince the world that you’re a dependable, debt-paying customer.
Moreover, a negative credit report can do more than impair your ability to get a loan or a line of credit–it can cost you your job. Under federal law, with your permission, current and potential employers can see your credit report if they’re considering hiring or promoting you. Naturally, an employer who sees that you’re not paying your bills is not likely to be favorably impressed.
You don’t have to sit back and let your credit report wreak havoc on your life. If you’re straining against your credit lines, there are a few points that you as a consumer should understand.
Be patient and don’t expect miracles to happen. Once you’ve accrued debts, there’s no simple way to make them disappear, no matter what you hear from companies that “guarantee” you relief from your obligations. The Federal Trade Commission recently announced Operation Eraser, a crackdown on fraudulent “credit repair” firms that may charge you more than $1,000 for patching up credit problems. At best, these firms don’t do anything that