I have spent the past 30 years in prison. After I was released I tried to get credit and no one could even find me. I finally got Transunion to give me a written score of zero.
I have a lot of money in my bank account but no one will credit me except T-Mobile, which allows me to finance some phones. I couldn’t even get a secure $ 200 credit card.
What can I do to improve my credit and get it done as quickly as possible? I would like to buy a fairly recent car. I have enough money to deposit at least half and fund the rest if I could get credit. Can you give me some advice, please?
You might hear about people who dramatically improved their credit score overnight, but they often did it by identifying a serious mistake in their credit reports. Or they already have credit and got a significant increase in their limit. But building credit from scratch takes time, often around a year.
Your criminal history does not show up on a credit check. But when you haven’t used credit for several years, the agencies don’t have enough information about you to calculate a score, making it difficult to get credit. If you don’t have a stable income or a history of employment, it can be even more difficult to get credit.
Sometimes you have to apply for several different credit cards before you find one that approves you. Try to apply for a secure credit card that specifically advertises that it does not require a credit check. You will still need to provide proof of income and your Social Security number to get approval. But without a credit check, at least your lack of history won’t be held against you.
These cards usually come with high fees and high interest rates. If you are approved, you will only want to make one small purchase that is no more than 10% of the overall card limit each month. This helps reduce the use of your credit, which is good for your score. Then make sure you pay off the balance in full each month.
You can also apply for what is called a credit builder loan. Essentially, it’s like a loan that works backwards. Suppose you have obtained approval for a $ 1,200 one-year installment loan. You would pay $ 100 per month and then after 12 months you would get your $ 1,200. This is not an option at most major banks, so check with online banks and local credit unions.
If you are renting a house and your name is on the lease, you may be able to create a loan using a rent reporting service, like Credit Rent Boost, Rent Reporters, or Rental Kharma. They will allow you to report your rent payments to offices, although you may need your landlord’s verification. Over time, this can help you build credit.
Any credit product you request should be reported to all three credit bureaus, ideally monthly, as that is the only way to create credit. Your payments over the phone are probably not reported to the offices, that is, unless you become a delinquent.
If you really need transportation right now, I think you will need to think of buying a car and building credit as two separate goals. Since you have savings, it may be more realistic to pay cash for an old car. You can upgrade after you have had time to build credit.
A final option for you may be to speak directly with a used car dealer about financing the car. Even without credit, they may be willing to finance you directly since you have a large down payment, even if your interest rate will be high. Some lenders specialize in borrowers with bad credit or no credit at all. It will be especially important to document your income if you go this route. Most lenders also have a minimum financing amount of around $ 5,000.
The good news here is that you are dealing with a blank slate, rather than a tarnished credit report. Many former incarcerated people find out upon their return that someone has used their social security number to apply for credit accounts or file fraudulent tax returns. Or they have defaults and legitimate privileges because they were unable to make payments while serving their sentence.
Beware of anyone who offers a quick fix. The only way to establish credit is to establish a payment history on time. You may need to apply for multiple credit cards and loans before you are approved. Once you’re approved and start making payments, the bureaus will be able to calculate a score for you in six months to a year.
Start small and be patient. You have managed to build up savings, which is no small feat after your incarceration. Over time, you can also build your credit.
Robin Hartill is a Certified Financial Planner and Senior Writer at The Penny Hoarder. Send your sensitive money questions to [email protected]
This was originally posted on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through practical and inspiring advice, as well as to resources on how to earn, save and manage money.