Credit score: How to bite it in one stroke

My credit score was rising steadily. It inched into the 700s and was looking good. Then I got a call. I had not paid a credit card for over 90 days. It was a card that I thought was paid off and for which I did not receive paper bills. Apparently I had signed up for online bills only but I forgot that and did not even know I had registered that account. It did not show up when I went to that bank site and logged on.

The reason it did not show up is that it is a business account and my other account was personal and the two automatically are on different pages. But I did not know that.

The upshot is that I was not paying this card, which had a low balance, because I didn't know I owed anything. As soon as I learned that I was behind I got caught up. Nothing overdue. But the damage was done. My credit score plunged about 300 points!

There was one other contributor: my high debt level. But that wasn't particularly new. The overdue bill was the biggie. So now my credit grade is "HR" - high risk!

Here's what's irritating about that: If you look at my credit history you will see nothing but green for miles. Bills paid on time, usually ahead, and more than the minimum, for many many months. Then this one bill is overdue. One out of fifteen cards. Anyone looking at that might ask me what happened and I have a reasonable explanation. But what happens is that the lenders look only at the score and they have no idea why it is so low. They think I must be a high risk. But I am not.

It's a dirty business, to be sure. Ugly. Fortunately, I don't need any more credit right now.

Big money

I will be receiving an unexpected windfall in December. A nice sum of money. Ever since I learned of it I have been trying to work out how to make good use of it, how to stretch it yet have fun with it. My main goal is to reduce the payments I make every month, and I will be able to pay off all of my credit cards and set aside the money for my car loan (the interest rate on the car loan is so low it actually makes sense to put that money into a savings account and pay the loan off from there rather than pay the car loan off immediately), which will cut my expenses by about $800 per month.

I am relieved, of course, to have this piece of luck on my side. I didn't do anything to earn it. At the same time I fear myself. My daughter suggested that I set aside a specific amount to blow on fun stuff, and I love that idea. I can put that amount in a separate account and keep track that way and then I am less likely to go through the money without realizing it.

In addition to the fun money, I will take out some for putting down a chunk on my house loan, giving a bunch to various charities, and finding some ways to keep the rest earning money. I will also purchase items I want: energy-efficient, more effective appliances and some camera lenses and other equipment. Items that will make my life more pleasant and that will save some energy, too.

What has been funny is that knowing about this money has not made me deliriously happy. It has given me headaches.

Not very organized

What did I do today to further my goal to be debt-free? That is, to be free of credit card debt. Not a lot. I paid an overdue car insurance premium plus made a couple of credit card payments. One of which is my highest-interest card.

I already developed a list of all of my credit cards with their balances, monthly payments, and interest rates, so I know which card has the highest rate of interest. I have, in fact, been working to cut that baby back, over several months. What this program says to do, though, is to take the ten bucks a day that I find by cutting expenses here and there (the book - see Pay It Down! - on the right - offers many ways to go at this) and put it right into that one credit card account, on top of the minimum payment. I recklessly did just that, before I have sifted through and found the cuts I need to make to pay for it.

Below my list of credit cards, on the same Excel sheet, I listed other regular payments. Yesterday I also went back to Quicken, downloaded transactions from my primary bank account, and started in categorizing each transaction. I've got a way to go, but it feels good because I know that if I stick to this, and go back to writing down every cash expenditure and entering those as well, I will really know where it is ALL going. There's just no substitute for knowing.