I spent the last 30 years in prison. After I got out, I tried to get credit and nobody could even find me. I finally got Transunion to give me a score in writing of zero.
I have lots of money in my bank account but no one will give me credit except for T-Mobile, which let me finance some phones. I was unable to even get a $200 secured credit card.
What can I do to improve my credit and do it as fast as possible? I would like to buy a fairly new car. I have enough cash to put down at least half and finance the rest if I could get credit. Can you give me some tips, please?
Dear No Credit,
You may hear about people who drastically improved their credit scores overnight, but often they’ve done so by identifying a serious error on their credit reports. Or they already have credit and got a major limit increase. But building credit from scratch takes time, often about a year.
Your criminal history doesn’t show up on a credit check. But when you haven’t used credit in several years, the bureaus don’t have enough information about you to calculate a score, which makes it difficult to obtain credit. If you don’t have a steady income or employment history, getting credit can be even harder.
Sometimes you have to apply for a few different credit cards before you find one that approves you. Try applying for a secured credit card that specifically advertises that it doesn’t require a credit check. You’ll 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 typically come with high fees and interest rates. Should you get approved, you’ll want to only make one small purchase that accounts for no more than 10% of the card’s overall limit each month. Doing so keeps your credit utilization low, which is good for your score. Then, be sure to pay off the balance in full each month.
You could also apply for what’s known as a credit builder loan. Essentially, it’s like a loan that works backward. Suppose you got approved for a $1,200 one-year installment loan. You’d pay $100 a month, and then at the end of 12 months, you’d get your $1,200. These aren’t an option at most major banks, so check with online banks and local credit unions.
If you’re renting a home and your name is on the lease, you may be able to build credit using a rent reporting service, like Credit Rent Boost, Rent Reporters or Rental Kharma. They’ll let you report your rental payments to the bureaus, though you may need your landlord’s verification. Over time, that can help you establish credit.
Any credit product that you apply for should report to all three credit bureaus, ideally every month, as that’s the only way you’ll build credit. Your phone payments probably aren’t being reported to the bureaus — that is, unless you become delinquent.
If you really need transportation right now, I think you’ll need to look at buying a car and building credit as two separate goals. Since you have savings, it may be more realistic to pay cash for an older car. You can upgrade once you’ve had time to establish credit.
A final option for you may be to talk directly with a used car dealership about financing the car. Even with a lack of credit, they may be willing to finance you directly since you have a large down payment, 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’re dealing with a blank slate, rather than a tarnished credit record. 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 liens because they weren’t able to make payments while serving their sentences.
Be wary of anyone who offers a quick fix. The only way to establish credit is to establish a history of on-time payments. You may have to apply for multiple credit cards and loans before you get approved. Once you get approved and begin 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’ve managed to build up your savings, which is no small feat after incarceration. In time, you’ll be able to build your credit as well.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected]