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This expert's credit score dropped to 547 during the last recession but is back in the 800s—here's what she did

Tiffany "The Budgetnista" Aliche was laid off during the last recession and saw a huge drop in her credit score after falling behind on debt payments. She's since recovered and shares advice on rebuilding credit and finances.

Photo courtesy of Tiffany Aliche, The Budgetnista
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Have you made a major jump in your credit score and would like to share your personal journey? Email reporter Alexandria White at allie.white@nbcuni.com if you're interested in being featured in CNBC Select's new "Credit Scores: Then and Now" series.

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Tiffany "The Budgetnista" Aliche was laid off during the last recession and saw a 255-point drop in her credit score after falling behind on credit card bills and mortgage payments.

But there's a silver lining: She used this misfortune as a wake-up call to alter her spending habits, save more and rebuild her bad credit to an excellent credit score in the 800s.

Below, Aliche, who is a financial educator and founder of The Budgetnista, shares her credit journey with CNBC Select and explains how she was able to rebuild her credit score after financial hardship.

How Aliche's credit score dropped to 547

Aliche seemed to have it all: A condo, a job as a teacher, a retirement account, an emergency savings and an 802 credit score. But then the 2009 recession hit.

The recession caused the school Aliche worked at to close, leaving her unemployed. She was able to receive unemployment, but that only paid for the bare bones of essentials — not her mortgage.

In an attempt to save her home, Aliche leaned into her side hustles: babysitting and tutoring. But that wasn't enough to keep her from becoming delinquent on her mortgage payments.

Soon, she drained her retirement account and emergency savings, but after all was said and done, she still needed more money.

After depleting her savings and borrowing money from her ex-boyfriend and friends, Aliche had a realization.

"You have to acknowledge that there are going to be some bills you're not going to be able to pay, and I've never not paid a bill. I couldn't wrap my mind around it," Aliche says. "I was like, 'OK, if there's no income coming in except for unemployment, that means I have to say what bill am I not going to pay in order to pay the bills I must pay.'"

Once she accepted this, Aliche came up with a prioritization strategy.

A 547 credit score on the rebound to 800+

"I came up with a kind of a prioritizing strategy where I said, 'OK let me list all of my bills and what bills I have to pay to maintain my health and my safety,'" Aliche says.

She explains that the essential bills can be different for everyone. For instance, medication or housing costs may be crucial expenses for you, whereas someone else may be able to forgo those costs.

If you're not sure whether your housing costs are essential, ask yourself if you need to stay in your current home, since there may be a less expensive option, Aliche says.

Aliche realized she was fighting to keep her condo, but had the alternative to move back in with her parents, which she did for a year. After that, she stayed on her sister's couch for a while and then rented a room for $500 with a bunch of friends until she was in better financial standing.

While some of the choices you have to make to get by during uncertain times may not be the most ideal in the short term, it can add up to significant savings in the long run. After all, if you pay $1,000 a month in rent and move back home for six months, that can be a $6,000 savings. Keep in mind, this may not equal $6,000 in a savings account if you have no job, but it can be $6,000 less in debt.

If you need to pay for essential bills while unemployed and decide to use a credit card, "you should not have any of the non-necessities going," Aliche says.

Credit cards can be a good way to finance new purchases when you don't have the money upfront since some cards offer an intro 0% APR period, such as the 15-month period offered by the American Express Cash Magnet® Card (after 13.99% to 23.99% variable APR). See rates and fees. There are also longer periods, such as the BankAmericard® credit card with 0% for the first 18 billing cycles on purchases and balance transfers (after 12.99% to 22.99% variable APR).

But make sure you use these cards sparingly to avoid high interest credit card debt.

Everyone makes mistakes and that's OK

When you're rebuilding your credit and finances, you may make mistakes along the way, but it's important to learn from them. Aliche wound up depleting her savings, falling delinquent on her mortgage and losing her condo, which all hurt her credit score.

And her biggest mistake? She didn't pivot fast enough to what she calls her "noodle budget."

Similar to an emergency savings fund, a "noodle budget" consists of only essential expenses. "Your noodle budget is if you had to eat ramen noodles, if you had to live off just the bare bones essentials, only the essentials — so, no cable, no nails, no hair, no entertainment — just temporarily while you look for a job," Aliche says.

She points out that you have to make some hard choices. For instance, if you have cable, but can't afford your mortgage, you should get rid of cable.

But keep in mind, Aliche says: "These times don't last forever. You find a job, you find new sources of income, but in the meantime, you have to maintain your health and your safety above all else."

Rebuilding your credit doesn't happen overnight. It's more of a gradual process, and slowly but surely you can get back on your feet. Aliche was able to make amends with the lenders that she was late with over time by paying off her debt and becoming current on her accounts. It's especially important to be current on your accounts since payment history is the single most important factor of your credit score.

"Once I became current, then my credit score started to rise, and I'm back at 800s now," Aliche says.

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