Lemondrop

The girl: Liz

Age: 25

Job: Marketing

Where she calls home: The Northeast

Her sitch: Liz wasn't particularly responsible with her credit cards or student loans after she finished college, and as a result, her credit score is in shreds. It's currently below 600, which lands Liz in the bottom 15 percent of the population. She's trying to remedy the situation, but she's wrestling with about $4,000 in credit card debt -- half of which is on cards charging more than 24 percent in annual interest. "The past three years have been a struggle to have my loans consolidated into manageable monthly payments and get my credit cards paid down," she says.

Her goals: Reducing her credit card debt and getting her credit score up so she can qualify to rent her own apartment in August (she currently sublets). She'd also like to save enough money to go on a vacation -- something she hasn't done since she graduated from college. In fact, Liz is so interested in her credit score she recently signed up for a monthly credit reporting service for $12 a month, so she gets a monthly credit report, and she's notified of any activity instantly.

"I find it to be really helpful and educational," she says.

The expert's take: "She's wasting her money on the monthly monitoring," says Boston financial planner Cheryl Costa, who notes that most people who need this service have had some kind of identity theft issue. "Things shouldn't be changing all that quickly, and her score is what it is. I can't imagine that month to month she's seeing significant changes."

How Liz Can Up Her Number

Freeze her plastic. Although Liz's cards are almost maxed out, she's still using them occasionally. Bad idea, Costa says. Your credit utilization ratio -- how much of your available credit you're using each month -- is responsible for 30% of your credit score. "She needs to get that ratio down," Costa says. "In fact, I'd suggest that she give the cards to a trusted friend to hold to be sure she isn't tempted. She really needs to eliminate this debt."

Pay down the high-interest debt. This isn't news to anyone, but with half of her debt on cards charging 24.99% and 27.99%, it'll take forever for Liz to get anywhere if she just pays the minimums. She's putting about $300 a month toward her credit cards, and if she dedicates that money toward the high-interest balances, she'll zero them out in about eight months. Then she can work on the rest.

Keep her cards open. It's tempting, when you're paying off debt, to make that last payment and cancel the card. Liz should resist, Costa says, because the open cards add to her credit utilization ratio. If she cancels them, she has less available credit, and her credit score will suffer. "However, she does need to keep a watchful eye on them," Costa says. "Because many issuers are now imposing inactivity fees if you don't use your card for 9 to 12 months."

Get her score to 620 or higher. "That's commonly cited as the minimum acceptable score," Costa says. "Anything below that indicates that the person has credit issues that need to be addressed and they are considered risky." Ideally, she should get the score to 700 or above. Unfortunately, she probably won't get there by August, when she wants to rent an apartment. She may have to continue subletting for a while.

Forget about the vacation, for now. Costa also ix-nayed Liz's longing for some time away. "She is in debt and her credit score is marginal, at best," she says. "She's not entitled to a vacation. It seems harsh, but that is the reality."


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Kate Ashford is a freelance journalist who writes about personal finance and health (and other things). Without online shopping, she wouldn't own anything. Her work has appeared in Money, Health and Glamour. For more, check out Her Two Cents.