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What this debt expert with an 842 credit score would do if she had to start over with no money and bad credit

CNBC Select speaks to debt relief attorney Leslie Tayne, an expert with an 842 credit score, about her advice for conquering your debt.

Photo courtesy of Leslie Tayne, Tayne Law Group

Leslie Tayne, 48, remembers being in her early 20s and unable to pay her private and federal student loans from law school. Her first job out of law school only paid $28,000 a year, and she was unable to afford both her minimum loan payments and her basic living expenses each month.

Tayne put her federal loans into forbearance for as long as she could. But there was no option to defer payments on her private loans, and they went into delinquency. The private loan lender ended up suing Tayne for nonpayment. 

As a result, her credit score was damaged and her unpaid debt continued to accumulate interest. 

Today, Tayne runs her own debt relief law firm, Tayne Law Group, and she has a nearly perfect credit score of 842 from Equifax using the FICO 8 scoring model.

But it took a lot of discipline to get there. As a single mother with three children and large student loan payments, Tayne lived off a limited budget as she worked to get her career off the ground. She was slowly able to chip away at her debt and, over time, was able to reduce her balance.

Below, Tayne shares with CNBC Select how she struggled to get out of debt in her 20s, and what she would do if she had to start over again with no money and bad credit.

How Tayne began with damaged credit

Like millions of Americans, Tayne had trouble paying off her student loan debt.

Fortunately, she didn't have loans after graduating from her undergrad, The State University of New York at Albany (commonly referred to as SUNY Albany), but her law degree proved to be costly.

Tayne's first job out of law school was working as an associate in public defense for nine months in the late '90s, for a $28,000 salary. It wasn't enough to cover her basic everyday expenses and her monthly loan payments. Although she wanted to pay something toward her loan, she couldn't afford to even meet the monthly minimums. She felt she had no choice but to put her federal student loans into forbearance and let her private student loans go delinquent.

"I knew that I couldn't be hard on myself during that time since I was building my career and raising my family and doing everything I could to plan for a debt-free future," she says.

The private loan lender ended up suing her for the approximately $45,000 she owed them, and they reached a settlement of about $30,000. A family member gave her the funds to pay this, but Tayne's credit still took a major hit.

"The damage was done," Tayne says. She estimates that her score, at its lowest, was probably in the low 600s, but she says she didn't even check it then because she knew it would be bad.

Tayne's federal student loans ended up going into default as well, but once she started making more money, she was able to work with the loan provider to set up a repayment plan. Her second job was working as in-house counsel to a national debt resolution company, which provided a higher salary than her former job in public defense. She made a plan to focus on building a career so she could afford to pay off her debt. 

For the next 10 or so years, as Tayne made more money, she would pay $923.31 in federal student loan payments each month. In 2012, once she had established a solid career, she made the final payment by putting down a large lump sum of money to pay off the remaining balance of $93,000.

"I paid a lot more than I borrowed," Tayne says. What started out as roughly $65,000 in federal student loans ballooned to more than double that by the time she paid it off.

What Tayne would do if she had to start over with no money and bad credit

Tayne says first she would find a way to increase her income. This step comes before jumping to fix your credit score, she says. First and foremost, the goal should be to bring in more money.

"If I had to start over with no money and bad credit, I would plan to get a job (possibly more than one) and work on building funds to pay my bills," Tayne says.

This is easier said than done, especially during an economic downturn as many young graduates today know, but in the meantime you can supplement your income in a variety of other ways. Try doing some summer cleaning and selling your old stuff on secondhand websites like Decluttr and Poshmark, or check out Freelancer to see what projects could use your skills. As coronavirus tensions ease and businesses open back up, download a dog walking app like Wag to see how you can help your neighbors at a distance while getting paid.

Once you have something set up, it's worth looking into your credit score and learning more about what impacts it.

"The Internet has expanded the opportunity for individuals to learn about credit and personal finance, optimize credit scores, obtain reports instantly and discover other helpful resources that I didn't have when I was starting with debt and limited income," Tayne says. 

While you focus on bringing in more income, take some time to plan what you're going to do next to rebuild your credit by visiting sites like Experian Boost™Credit Sesame® and Credit Karma.

How a credit card can help you build back up your credit

You can also use a credit card to help build your score back up if you're burdened with student loan debt like Tayne was.

Today, there are more options available for consumers with fair or average credit profiles, compared to when she was repairing her damaged credit.

CNBC Select has ranked the best credit cards for building or rebuilding your credit and here are a handful of our top picks.

Steps for anyone with student loan debt that they can't afford

Tayne recommends to people who can't pay their student loan payments to consider all options, including forbearance, while working on building a budget. It's important to maintain a healthy cash flow and simultaneously keep non-essential spending down so that you have enough leftover income to tackle debt once your basics are covered.

As you start chipping away at your debt (even if that means just paying the minimums on time), start building your savings if you have any extra cash you can stash away. High-yield savings accounts are a great place to save money, especially when you choose an account that doesn't require a minimum deposit.

Tayne also recommends seeking a debt professional's help because they can be a great resource. Debt management companies are able to help you negotiate a payment plan with your lender that includes reducing the amount you owe and your interest rate. Not all debt management programs are legitimate, so make sure that you seek an accredited non-profit credit counseling agency or check with your state Attorney General and/or local consumer protection agency for a reputable debt relief law firm. A good place to look is the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

"Today, I run a law firm dedicated to helping individuals get on the path to financial freedom and live life with less debt and stress," she says. "I express my empathy to anyone that's struggling with debt because I've been in a similar situation."

Her best advice for paying off debt?

Don't be hard on yourself or compare your finances or situation with others, says Tayne. "Everyone is in a unique financial situation." 

While she recommends that people pay down their debt as quickly as possible to reduce the additional cost of interest fees and help their credit score improve faster, she realizes that's not always a possibility. 

"Go at your own pace, create realistic goals that you can reach with your budget factored in and stick to it," Tayne says. "After several loan forbearances and putting the work and energy into building my career, I finally reached a settlement that I could afford. Take charge of your finances, but remember that your credit score is just a number that will improve when worked on."

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