After illness, cards maxed out, turned down for loans


To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs. See her website for more personal finance tips and free budgeting worksheets.
Ask Sally a question, or read her previous answers in the To Her Credit archive

Dear To Her Credit,
My credit cards are maxed, as the result of illness. Well, not all, just $3,000 on Walmart/Discover, $2,000 on Visa and $1,000 on MasterCard. I have never missed or been late on any payment.

I have applied for a personal loan at my credit union, but I was denied. I also applied at Financial One, but I was denied. I know that continually asking for credit lowers my score.

I live in New Hampshire, and I have contacted a consumer credit company. I really don't want to do that or go through bankruptcy! My plan was to get down to one major card, Visa, and get rid of the Walmart/Discover and MasterCard, pronto!

Please point me in the right direction so I can keep one or two cards without the previous options I have explored. I really would like some sort of debt consolidation because I am responsible, and it really was just that the timing was bad! Thank you for your help!   -- Elizabeth


Dear Elizabeth,
You're right -- applying repeatedly for credit can lower your score. However, because you have never missed or been late on a payment, and you have a history of handling credit with three credit cards, you should have a fairly strong credit score. A couple of loan applications shouldn't be a huge deal.

Banks and other lenders are far more worried about your history of payments than they are about whether you have applied for credit recently. It makes sense -- people who have paid their bills in the past are more likely to pay them in the future.

In my experience, a credit inquiry can cause a credit score to dip about six points. (Compare that to the effect of one 30-day late payment, which can cost an excellent score some 60 points or more!) For people with excellent scores, a few points aren't going to make any difference in whether they get a loan or not. In addition, the effect is temporary.  I wouldn't hesitate to apply for credit just because of this slight, temporary downside.

On the other hand, there's no point continuing to apply for loans and getting denied. That's discouraging and a waste of time. Before you apply for another loan, find out why you didn't get the first two. When you are denied a loan, you have a right to see the credit report that was used in the lending decision. You have 60 days from the time you were denied to contact the bureau and ask for a free credit report. This is in addition to the annual free credit report to which you are entitled, which can be accessed at You can also pull your credit score at for about $20 each from the big three credit bureaus (Equifax, Experian and TransUnion).

If your credit report and score look good, perhaps they weren't the reason you didn't get the loans. Lenders look at more than a credit score when they decide whether to give you a loan. They also consider your employment history, including how long you've been employed and whether your income will support your debt repayment, for example.

If you're having a hard time getting a loan, consider paying off your debts in place. Your total credit card debt is $6,000 -- an unpleasant enough total, but not an insurmountable one. In fact, the average U.S. household that has credit card debt owes $7,100, according to 2010 figures from the Federal Reserve.

Depending on your income or your potential for earning income, you may be able to pay your credit card debt off quickly. Instead of looking for another loan, consider spending your time earning extra income with a part-time job or by working extra hours, if your health permits. Another option is to sell something, or a number of things, to raise the money to reduce your debt load.

If you can find extra money to pay off even half your outstanding balance, you'll save a significant amount of interest expense every month. That makes it easier for you to apply more of your future payments to reducing the principal. With concerted effort, you may be able to pay off your balances faster than you think.

You're right to be cautious of debt consolidation or bankruptcy. Both options carry high costs, not just in money, but in time, trouble and damage to your credit history.

Seeking help from a credit counseling agency is completely different. Simply talking to a counselor does not affect your credit score at all. They often deal with people who, unlike you, are far behind on their bills but you don't have to be behind in your bills to benefit from their advice. A credit counselor can look at your total financial situation and help you see your options. I recommend finding a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

You can recover financially from difficult times, just as you recovered physically. Best of luck to you, and keep taking care of your credit!

See related: Even barely late payments can impact your credit score, Average credit card debt statistics

Meet's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday,'s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Published: July 25, 2014

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Follow Us

Updated: 10-28-2016

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.