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Repairing Credit After Release from Prison

Time spent in prison cannot directly affect your credit score, but it can indirectly. First and foremost, credit ratings are maintained by constant and consistent use. Creditors want someone who uses their credit card every month but is able to pay off the balance at the end of each month. This shows responsibility and the ability to live within your means. While in prison, this is simply not possible.

If you already had credit card, mortgage or other loan debt before imprisonment and were not able to pay it down while in prison, your score will drop drastically. Interest still accrues while in prison and filing bankruptcy to deal with the debt makes it even worse. Bankruptcy devastates credit and it may be unnecessary.

Cesare says that lenders are primarily concerned about being paid. Talking to a creditor about bad debt due to incarceration may allow former prisoners to restructure their debt even if it means the creditor is only going to recover a portion of what is owed. Cesare said to make sure that it is both an amount that can be handled and an amount that satisfies the lender.

The first step to repairing credit is to see what happened to it while in prison. Anyone can obtain one free annual credit report from any of the three major credit reporting agencies: Experian, TransUnion or Equifax. This will list all existing debts and a current credit score.

Establishing new credit is just as important as cleaning up old debt. For those who cannot obtain a line of credit because of a low score, Cesare suggested applying for a secured credit card in order to get started in exercising credit.

He also suggested seeking help from family or friends. Asking for small loans to cover outstanding debt may get former prisoners out of difficulty, possibly under more favorable terms. Additionally, a family member or friend with a good credit rating could cosign loan applications, inspiring creditors to extend credit to newly released individuals. 


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