This post is was originally published on The Penny Hoarder
In 2005, Melinda Smieja’s 13-year-old daughter was diagnosed with a terminal brain tumor.
“So here I am a single mom, and my daughter gets sick,” she explains. “And I’m like, ‘What am I gonna do?’”
She had plenty to worry about. She still had to care for her younger daughter, 8 years old.
Melinda was (and still is) on disability income. She’s unable to work due to reflex sympathetic dystrophy, a nerve disorder similar to MS.
She and her oldest daughter moved from their home in Seabeck, Washington (near the west coast) to Seattle for six months while her daughter underwent treatment. Her youngest stayed at home with the man who would later become Melinda’s husband.
For the last three months of their stay, Melinda and her daughter moved into the Ronald McDonald House, which houses families of sick children during care. The stay, including meals, cost $15 a night, drastically cutting her expenses.
But before that, she was on her own in a new city. She was living on credit cards to get by.
“I used (a credit card) for dinners, I used it for food,” she says. “For a place to stay. It got to the point where all of my credit cards were maxed out. My credit score was, like, 500.”
She later clarified her score was down to 480 by the time she checked.
Thankfully, most of her daughter’s medical bills were covered by insurance. But to cover their living expenses, she racked up somewhere between $20,000 and $30,000 in debt on 11 credit cards (including some debt that existed before the diagnosis).
“I was so in the mix of everything else that it didn’t even dawn on me that was a bad thing,” she explains.
In 2005, Melinda Smieja’s 13-year-old daughter Rian was diagnosed with brain tumor. Photo courtesy Melinda Smieja
After six months, they returned home, Melinda’s daughter with a prognosis of five years to live. That was 12 years ago.
Nearly 26 now, she’s still severely disabled and dependent on her mother for constant care.
Melinda is just thankful she has her daughter.
But the intervening years haven’t been without serious hurdles for Melinda and her family, which has grown to include not just her and her two daughters, but also her husband and two foster children.
Accumulating Credit Card Debt
Before her daughter became sick, Melinda didn’t think much about her debt or spending habits.
“My mom gave me a Discover card when I was 17 years old,” she says. “And (she) … never made me pay a single payment.”
She said, for her, credit cards meant, “I can use this card, and I can buy what I want, and I don’t have to pay for it.”
As an adult, Melinda regularly used credit cards. She made at least minimum monthly payments, so none of her debt was in default. But she didn’t pay attention to its effect on her credit score.
“By the time I was 24 or 25, I had three or four credit cards that were all maxed out,” she explains.
Living on disability and supporting two young daughters on her own left little extra money to focus on debt, so she was paying as little as possible and continuing to add debt by accruing interest and opening new cards.
“I always just had this mentality that credit cards didn’t matter,” she remembers. “It was what paid my expenses. It’s what I did when I wanted clothes or shoes — I went and bought clothes or shoes.”
She was maxing out cards and opening new ones without thinking about it.
Finally, she started getting denied for new cards, even at the credit union (where she was a member) and at Bank of America, where she already had a card. Then Chase lowered her limit on an existing card, causing fees to add up.
Looking back, she realizes how fast debt can snowball.
Her lightbulb moment came in 2005, just after her daughter’s treatment. She applied to refinance her mortgage and reduce her 6.5% interest rate and $1,200 monthly payment she was struggling to make.
When she was denied because of poor credit, it really struck her how much of a hole she was in.
But it still took a few years before she’d get serious about digging herself out.
Climbing out of Credit Card Debt
Her new husband, 14 years her senior, helped her learn the personal finance lessons she hadn’t learned as a kid.
“He was the best thing that could have ever happened for me, because part of him was like, ‘You need to buck up, girl, and you you need to get your (act) together.’”
She finally realized, “I knew that I could only go for so long the way that I was going. I was going to crash and burn.”
Nearing 40, Melinda agreed with her husband that it was time to grow up and get a handle on her finances. But she had no idea how to do it.
“I was struggling. It was stressful,” she says. “I would cry every night, because I didn’t know how I was gonna pay these bills.”
That was right around the time the internet was becoming the go-to resource for anyone with questions about anything.
In 2010, an email campaign led her to Credit Sesame, a new company (at the time) offering an easier way to monitor your credit history.
“It was something that I had been searching for (without realizing it),” Melinda explains.
Most consumers won’t put in the work to request a free credit report from the major bureaus, even though we’re entitled to them every 12 months, she points out. It seems like a hassle, so most of us steer clear.
That lack of information makes you feel like you have no control over your debt, credit history or the almighty credit score. So, you just don’t do anything about it.
That’s how Melinda felt.
Melinda signed up with Credit Sesame to receive her free “credit report card,” which revealed her credit score, along with everything that went into it.
Her mortgage and credit card debts were displayed. She could see her total debt and exactly how much she owed to each lender, plus interest rates and minimum monthly payments.
It made her overwhelming situation manageable.
“I could look and I could say, ‘Okay, this is what’s all going on here. This is my debt. This is what’s happening. This is what’s making my credit (interest) high.’”
She knew her biggest problem was that list of credit cards. Her debt-to-income ratio was high, and she was sitting on a mountain of debt.
Armed with the information in front of her, she knew exactly which steps to take to eliminate her debt and raise her credit score. She took a revised debt snowball approach to pay off her credit cards.
Starting with the card with the highest balance, she paid as much extra each month as she could.
“I just paid (about) $200 a month on a credit card that had, like, a $25 minimum payment, and then I paid the minimum payment on everything else… And I’d get it down to two or three hundred dollars. Then I’d go onto the next one.”
She’d pay off credit card balances and stop using the cards.
The work wasn’t quick. It was slow and steady — but it paid off.
Last year, Melinda’s credit score hit 680, crossing the line of what lenders consider “good credit” for the first time.
Changing Her Spending Habits
In addition to the credit report card, Credit Sesame shares custom recommendations to help you build or rebuild credit.
Melinda applied again to refinance her mortgage with a company Credit Sesame recommended and was finally approved, more than a decade after her original attempt. With the interest rate reduced to 4.1%, her monthly payment dropped to $675.
Melinda still has several open credit card accounts to maintain a long credit history, but she only has a balance left on two of them.
“Using a credit card becomes a habit.,” she said. “It becomes something that you get used to, that’s a part of your life. And you don’t think about the consequences. You don’t think about what it’s going to do to your credit.”
After her experience, she’s careful to teach her kids smart personal finance early. She explains:
“My 21-year-old got a job last June, and I just had her open her first credit card. It only has a $400 credit limit … And I say, ‘You put $40 on there a month, and then you pay it off at the end of the month.’
“I’m trying to teach her the importance of using wisely but also paying it off and never spending too much that you can’t afford the next month.”
Their 19-year-old owes her parents money after a car accident last year, so they set a minimum monthly payment (no interest!) of $150.
Melinda proudly recounted, “She’s at the point now where her $150 a month has jumped up to $300 a month, because she’s eager to get it paid off. … She’s only 19 years old and she’s already got it. She figured it out.”
Seven years of chipping away at debt has paid off. The last time Melinda checked her score on Credit Sesame — which she does often, because it’s “addicting” to watch it rise — it was 764.
“For my daughter’s 21st birthday, we’re going to Hawaii,” she explains. “And so we had to put down a portion of it now to pay for the trip. As soon as I paid — I put $600 on my credit card — and I’m like, ‘Oh my God, I have to get this paid off!’”
Now, “I can’t stand to have any kind of balance on my credit card, because it’s scary. It’s a scary thought. What happens if I fall back Into this pit?”
Of the horrible news that spurred her spiral 12 years ago, Melinda says, “(My daughter) is still here with us, and so it made it all worth it. The struggle that I went through. The 12 years of my life have been ups and downs, but just being able to have the financial thing off my back has made everything a blessing.”
Dana Sitar (@danasitar) is a senior writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).