Rebuilding credit after being released from prison can be a challenge, but you can rebuild it using these basic guidelines and directives. Don’t be overwhelmed, just follow the simple steps in our guide book HT Credit Solution, and here in this article.
According to studies in Maryland, Illinois, Ohio, and Texas, many findings were ascertained which include:
Attitudes. Returning prisoners have extensive criminal and substance-use histories, but are optimistic about what life will be like after release, showing high levels of self-esteem, and expect that the reintegration process will be relatively easy.
Prison programs. Prisoners who participate in job training and educational programs are less likely to return to prison after release. Additionally, former prisoners who participate in an employment program or substance abuse treatment are better able to avoid reincarceration within that magic first year of release.
Substance use. Despite extensive substance-use histories, few returning prisoners participate in substance-abuse treatment during incarceration. Those who do participate are less likely to use drugs after release. About a quarter of former prisoners’ relapse to drugs or alcohol within a year.
Health. Although returning prisoners have positive views of their health, some report having chronic or infectious diseases, depression, or other mental illnesses. All need attention to succeed.
Rebuilding Credit Begins
Employment. Many people returning from prison have significant educational and employment deficits: roughly half lack a high school degree or equivalent, more than half have been previously fired from a job, and many depended on illegal income before incarceration. After release, former prisoners have limited success finding employment, only half find work the first-year post-release. Most former prisoners owe debt at release, which few manage to pay during the year following their release. Obviously, this needs to be addressed.
Former prisoners who held an in-prison job, participated in job training while incarcerated, earned a GED during prison, or participated in an employment program soon after release work a greater percentage of time the first-year post-release than those who did not. Other factors that increase the likelihood of employment include having worked before prison, lining up a job before release, and using a former employer to find a job after release.
Use Available Resources
Communities. Significant portions of returning prisoners are clustered in a handful of neighborhoods with high levels of social and economic disadvantage. Still, roughly half of released prisoners return to different neighborhoods than where they lived before incarceration—either to avoid trouble or because their families have moved.
Recidivism. Although few former prisoners report engaging in crime after release, nearly a quarter say they are rearrested the first-year post-release. Official records show that nearly a quarter of former prisoners are reincarcerated in state correctional facilities within the first year of release, though reincarceration rates vary by state, ranging from approximately 15 percent in Ohio and Texas to nearly one in three in Illinois. Among prisoners returned to custody, almost 75 percent return because of a supervision violation. Former prisoners who worked before prison and those who find employment soon after release are less likely to be reincarcerated within a year of release.
Post-release supervision. Being released to parole supervision helps former prisoners find employment and reduces their likelihood of substance use after release. However, parole supervision has almost no impact on self-reported crime or rearrests after release and increases the likelihood of reincarceration because of technical violations.
There are many regimented and well-documented methods of rebuilding one’s credit after “life makes overtures” in my book HT Credit Solutions. Divorce, bankruptcy, business failure, etc. But nothing quite so delicate as starting over after being freshly released from a stint in jail. Prison doesn’t have to mean a life sentence of bad credit. Credit building opportunities exist for all adults. Most people don’t plan to go to prison, yet according to a Bureau of Justice Statistics report, 1,561,500 people were incarcerated in 2014. Of those prisoners, 53,000 were serving sentences of less than one year. Those serving longer sentences may not be concerned with credit scores or the impact prison has on credit history. However, for those 53,000 serving less than a year and undoubtedly thousands more serving under three years, credit history is an important factor to consider since it may come into play sooner than not.
Re-entering society after incarceration can be challenging for the individuals themselves, their families and their communities. One of the biggest difficulties is the financial burden on former prisoners and their families after months or years of confinement. Debts carried over from life before prison, legal fees during incarceration, and the need to find a new job after release can all make it hard to get back on track. Your credit history, in particular, has very probably suffered while you were in confinement.
You can strengthen your finances, manage debt and rebuild your credit.
The good news is that a prison term will not be reflected in your credit history. Whether you served one day or 100 years, your credit history does not include incarceration information.
Tony Leahy is the Director of the nonprofit Consumer Education and Training Services (CENTS) in Seattle, an organization that offers classes in money management for those re-entering society. “If you follow the principles of money management, your credit’s going to automatically improve,” Leahy says. During these management sessions Tony counsels four primary things:
- Make a Budget.
- Assess Your Debt.
- Find Help. And finally,
- Rebuild Your Credit.
Rebuilding Your Credit.
Let’s concentrate on Tony’s last bullet point and the object of this article. In a previous article, I talked about helping to build a teen’s credit history and a positive mindset going forward. But the child is limited by statues because of age, while an adult (over 21) is not hindered by such, and has many more options available. First and foremost, pull your credit report. The best way to do that is going to Annual Credit Report. Once done and you have received your reports, you can now plan a course of action using these tips.
Talk to Your Bank. If you have a checking and/or savings account, go in person to that bank and talk to someone face to face. Explain your situation, your goals, your plans to rebound, and see about getting a low-limit credit card from them. If you don’t get a positive response from them, try a credit union. They’re often easier to deal with than the “big box” banks.
Increase Credit Score
Get a Co-Signer on a Loan. If you can find a friend or relative that will agree to be a co-signer on a loan or credit card, this will help your credit immensely. It might be hard to find someone to put their credit on the line for you, but you will never know until you ask.
Open a Department Store Charge Account. This type of credit account is generally very easy to get but they can have high-interest rates. One suggestion is to get a charge account at a department store that you like to shop at and use it a few times each month. The most important part of this plan is to make sure you pay off the balance at the end of each month. You don’t want to pay that high-interest rate and you want this account showing activity and responsible management — both are great in increasing your credit score.
Get a Secured Credit Card. If you are unable to get an unsecured credit card from a bank or credit union, then apply for a secured credit card instead. Yes, you do have to put up money in a savings account as collateral, but these cards do report activity to the credit bureaus which will help you re-establish a credit history. Make sure you read all the fine print before getting this card as there are some really, really bad ones, but there are some really great ones as well. Watch out for high fees, make sure they report to the CRA‘s, and see if it will eventually turn into an unsecured card after a year or two of on-time monthly payments.
Earn Trust and Respectability
Become an Authorized User on Someone’s Credit Card. I’ve talked about this option extensively in a previous article, and in the book HT Credit Solutions. Still a good option.
Having a steady source of income helps in all facets of recovery post-release. That and a true and real willingness to change one’s heart and mind for the better. With some tough personal management, both financial and emotional, there are no limits to what can be accomplished. We as a species have that history. Good luck on the journey back.