I’ve spent the past thirty years in prison. After I got out, I tried to get credit and no one could even find me. I finally got Transunion to give me a zero writing score.
I have a lot of money in my bank account but no one will give me credit except T-Mobile, which allows me to fund some phones. I couldn’t even get a $200 secured credit card.
What can I do to improve my balance and do it as quickly as possible? I would like to buy a fairly new car. I have enough cash to put at least half of it and finance the rest if I can get a loan. Can you give me some advice please?
Dear No Credit,
You may hear of people who dramatically improved their credit scores overnight, but often did so by identifying a serious error in their credit reports. Or they already have credit and got a significant increase in the limit. But building credit from scratch takes time, often close to a year.
Your criminal history does not appear on a credit check. But when you haven’t used credit for several years, the offices don’t have enough information about you to calculate the score, which makes it difficult to get credit. If you don’t have a stable income or work history, getting credit can be more difficult.
Sometimes you have to apply for a few different credit cards before you find one that agrees with you. Try applying for a secured credit card that specifically declares that it does not require a credit check. You will still need to provide proof of income and your Social Security number to get approved. But with no credit check, at least your lack of history won’t be held against you.
These cards usually come with high fees and interest rates. If approved, you’ll want to make one small purchase of no more than 10% of the card’s total limit each month. Doing so keeps your credit usage down, which is good for your score. Then, be sure to pay off the balance in full each month.
You can also apply for what is known as a building credit loan. Basically, it’s like a loan that works in reverse. Let’s say you are approved for a one-year installment loan of $1,200. You’ll pay $100 a month, and then at the end of 12 months, you’ll get $1,200. This is not an option at most major banks, so check with online banks and local credit unions.
If you rent a home and your name is on the lease, you may be able to build credit using a rent reporting service, such as Credit Rent Boost, Rent Reporters, or Rental Kharma. They will allow you to report office rent payments, although you may need to check with your landlord. Over time, this can help you build credit.
Any credit product you apply for should report to all three credit bureaus, ideally every month, as this is the only way to build credit. Your phone payments to the office will likely not be reported – that is, unless you become overdue.
If you really need transportation right now, I think you’ll need to consider buying a car and building credit as two separate goals. Since you have savings, it can be realistic to pay cash for an old car. You can upgrade as soon as you have time to build credit.
Your last option may be to speak directly with a used car dealership about car financing. Even with a lack of credit, they may be willing to finance you directly because you have a large down payment, even though your interest rate will be high. Some lenders specialize in borrowers with bad credit or no credit. Documenting your income will be especially important if you go this route. Most lenders also have a minimum financing amount of about $5,000.
The good news here is that you are dealing with a blank slate, rather than a distorted credit history. Many formerly incarcerated people discover upon re-entry that someone has used their Social Security number to apply for credit accounts or file fraudulent tax returns. Or they have legitimate delinquencies and privileges because they were unable to make the payments while serving their sentences.
Be wary of anyone who offers a quick fix. The only way to create credit is to create a record of payments on time. You may have to apply for multiple credit cards and loans before they are approved. Once you get approval and start making payments, the offices will be able to calculate the score for you within six months to a year.
Start small and be patient. You have managed to build up your savings, which is no small feat after prison. In time, you’ll be able to build up your credit as well.
Robin Hartell is a certified financial planner and senior writer for The Penny Hoarder. Send your tough financial questions to [email protected]