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This article is an installment of our You Can Money content series, where we highlight the journeys of people who have found ways to redefine their relationships with money.
A job loss, unexpected medical bills or accumulating a bunch of debt can wreck your credit, and it may seem impossible to get back to a sound footing. Yet Lucas J., a 40-something university professor, was able to do it through a combination of efforts that included creating a plan to manage his debt and financial discipline.
When he graduated from college, Lucas already had $4,000 in credit card debt and a decade working in the music industry right out of school didn’t provide much financial stability.
“I never made more than $20,000 after taxes, but I tried to live way beyond my means and had to start paying for my debt,” says Lucas. “I never missed a payment, but I created more debt paying for that debt.”
Graduate school added another layer of debt. Lucas says that if he hadn’t qualified for an-income based repayment plan that’s available for federal student loans, his monthly student loan payment would have been $2,700. That would be in addition to his monthly minimum credit card payment of $2,000.
“One day, I just couldn’t pay anymore,” he said, “and I knew that I would not be making significantly more after graduate school.”
Lucas called his issuer. “I said, hey, I’ve never missed a payment, but it’s blood from a stone at this point,” he remembers. He then worked with a representative who was able to create a payment plan that included paying $500 a month over 60 months at 0% interest.
Using this as a starting point to pay down his debt, Lucas cut way back on discretionary spending and paid down his balance over a five-year period. Today, his credit rating is in a respectable 700-plus range, but he has to guard against falling back into bad habits. “The temptation for new cards is always there, now that banks want me again,” he said.