Here's What Happens When You Don't Repair Your Credit

As a 19-year-old college student, I charged up a bunch of credit cards. When I couldn't afford the minimum payments, I tried to ignore my debt and my creditors -- which is hands-down the worst thing you can do. Not repairing my credit cost me big-time. These are the consequences I experienced as a result of not fixing my bad credit. Take these hard-earned lessons to heart, then learn what I wish I'd done differently.

I paid more for a lot of things

I figured that I'd simply avoid using credit until the negative information fell off my accounts. But negative information sticks around on your credit report for seven years, which is a long time to go without credit. And even though I wasn't applying for credit cards or loans, I paid more in other ways.

When you have good credit, you can often avoid security deposits for things like your electric bill and cellphone. Some apartment complexes will even waive security deposits for tenants with good credit. But because my credit scores were in the low 500s, I often paid security deposits of several hundred dollars. Coming up with extra money for deposits when you're on an entry-level salary gets painful quickly.

Not surprisingly, I also paid a lot more for auto insurance as a result of having bad credit. Drivers with poor credit pay an average of $4,145 annually for car insurance, according to research by The Motley Fool Ascent. That's more than double what a driver with excellent credit can expect to pay.

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Debt collectors hounded me

I avoided answering any calls from numbers I didn't recognize, but debt collectors have a way of finding you anyway. Every day, I got a rainbow's worth of colorful envelopes from collection agencies in my mailbox. I tried really hard to ignore those letters.

But then they started calling me at work. I hung up when a debt collector first reached me on my office line. Then, the collector called our accounting department and asked them to verify my employment so they could pursue wage garnishment in court.

I knew I couldn't put off dealing with debt collectors any longer. Finally, I returned their calls and agreed to pay $275 a month on my largest account in collections. That was a huge burden, considering I only took home about $2,000 per month back then after taxes and health insurance.

In retrospect, I should have negotiated with debt collectors. Usually, they can't garnish more than 25% of your disposable income -- the income you have left over after you've paid for necessities -- and they can only do so with a court order. Given my low income, I probably could have gotten them to agree to a substantially lower payment.

I paid 18% APR for a car loan

You know how I said I thought I could avoid credit for seven years? Well, by 2010 my Gumby green Toyota Corolla had over 200,000 miles on it. Finally, my mechanic refused to fix it, saying the car was a fire hazard.

I was a writer for a local newspaper back then and easily drove 1,000 miles covering stories, so going without a car wasn't an option. After fetching $121 when I sold my old Corolla for scrap metal, I paid a whopping 18% APR on a $7,700 used car.

What I wish I'd done sooner to fix my credit

There's not much you can do to have negative information removed from your credit reports, provided it's accurate and within the statute of limitations. But I didn't need to wait for the negative information to disappear in order to start rebuilding. I could have applied for a secured credit card, where you put down a security deposit that becomes your line of credit. As you make on-time payments, you build positive history on your credit reports, and your score usually improves over time.

With any financial mistake, you'll typically have better options if you take quick action to correct the issue. But take it from me: You don't want to wait until you're sitting in the financing office of a used car dealership to start thinking about how to fix your credit.