It’s hard to get your life back on track after returning to the outside world after prison. This hardship can be made even worse when your credit score has suffered during your sentence, making it harder to get the financial aid that you need to get back on your feet.
If your credit score has suffered while you were in prison, it’s essential that you work to repair your credit as quickly as possible. Here’s what you need to know about credit repair after prison.
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How Prison Affects Your Credit Score
Incarceration records do show up on background checks, but not on credit reports. This means that time spent in prison can’t directly affect your credit score, but it can influence your credit score in indirect ways. Here are some things that might happen to your credit score while you’re in prison:
- Lack of utilization will prevent you from building your credit. While you’re in prison, you won’t be able to improve your credit score by making regular use of your credit card and paying off your balance each month. This means that the best you can hope for when you leave prison is that your credit score will be the same as it was when you went in. This is especially bad if you didn’t spend much time building credit before going to prison.
- Closing accounts will cause your credit score to drop. When a credit account closes it often results in a drop in your credit score. Depending on how much time you spend in prison, you may find that many of your accounts will have automatically closed by the time you’re out.
- Without income, debts can go unpaid. If you have outstanding debt, either in the form a mortgage, credit card bills, or other loans you can expect to have a hard time repaying those from behind bars. As this debt goes unpaid and the late payment notices start to pour in, your credit score will drop dramatically.
- Bankruptcy will lower your credit score. If you’re unable to pay off your debt with your own finances or with loans from friends and family, then you may have to declare bankruptcy. Bankruptcy is devastating to your credit, even when it’s the only option you have.
The effect of prison on credit scores goes beyond just one person. High incarceration rates connected to particular locations and minority populations can be linked to lower-than-average credit scores among disadvantaged groups.
Check Your Own Credit Report
The first step towards repairing your credit after prison is to see what your time served has done to your credit score. You can do this by getting a copy of your credit report. Make sure that you know how to read your credit report. Once you’re sure about that, you can do all or one of the following:
- Contact any or all of the three major credit reporting agencies (Experian, TransUnion, and Equifax) for a free annual copy of your credit report.
- Get a copy of your credit report and credit score from your bank, if they offer this service.
- Get a copy of your credit report from your credit card company, if you still have an account open after leaving prison.
Once you know what your credit score is after prison, you’re ready to start taking steps towards rebuilding your credit.
Repairing Your Credit After Prison
Pay Any Debts and Settle Delinquent Accounts
The most important thing to do when it comes to repairing your credit is to pay off any outstanding debt that you have. You should be aware that interest will have accrued on these accounts during your time in prison, so you can expect to have more debt to your name than when your sentence began.
To counteract your growing debt, you might want to try settling with your credit card company or other lender. Lenders are primarily interested in getting paid back, even if that means they have to give up on receiving the full amount. Contact your lender and explain your situation, then try to negotiate a settlement (a) that you can handle and (b) that will satisfy the lenders. This is called a “pay for delete” settlement.
Apply for a Credit Card or Secured Credit Card
One of the most consistent ways to build credit is to use your credit card regularly, paying off your balance in full at the end of each billing cycle. For this reason, getting back on the horse with your credit card is critical to repairing your debt after prison.
However, if your credit score has dropped dramatically during your time in prison, you will probably find it difficult to open a new credit card account. If this describes your situation, you can try using a secured credit card to build credit.
Ask for Help
Rebuilding your credit doesn’t have to be something that you do alone. Asking a friend or family member with a good credit score to cosign your loan or credit card applications will go a long way towards inspiring lenders to approve you for a line of credit.
Although it won’t help you build your credit, you can also ask friends and family for small loans to help you get back on your feet. For example, if you need to pay off your existing debt before opening new accounts.
Consult Credit Repair Companies
If your credit is too bad for you to handle on your own, you can reach out to a credit repair company to assist you. The best credit repair companies are used to dealing with difficult cases in which a person’s credit score has dropped dramatically, so odds are that they will have the resources necessary to help you rebuild your credit.
Prison doesn’t have to be the end of your financial life. By repairing your credit after prison, you can find yourself back on your feet and enjoying your old life again. For more information on how to repair your credit, visit the Fiscal Tiger credit score resource center. For more information on how to dispute inaccuracies on your credit report, visit our dispute letter resource center.
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