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For better or for worse, having good credit is almost a necessity in today’s world. A favorable credit score can mean getting a loan for a more reliable car, a mortgage, a lease on an apartment and even a job in some cases. Good credit also affords you better interest rates and lower insurance premiums. But often, domestic violence survivors leave relationships in poor financial condition. Whether your abuser left you with ruined credit or none at all, here are eight steps to take to rebound.
- Report fraud immediately. If your abuser ever forged your signature for financial gain, applied for credit in your name or made unauthorized purchases on your credit card, file a police report. It will be necessary for disputing fraudulent charges with your bank and requesting errors be removed from your credit report.
- Automate everything. Paying bills on time is extremely important to having good credit. Tackle past-due accounts and get them current. Then ensure you never miss a payment by setting up automatic payments either through the credit company or through your personal bank.
- Snowball your debt. Dave Ramsey, author of Financial Peace and The Total Money Makeover, suggests tackling debt in order of smallest balance to largest. Start by paying the minimum amount due on every account. Throw as much money as you can spare at the smallest balance. Once that’s paid off, take the money you were paying on the first debt and apply it, plus the minimum amount due, to the next smallest balance. Repeat until you’re debt-free.
- Don’t close credit accounts. Creditors also look at your credit utilization ratio when considering lending to you. The ratio is how much credit you’re using in comparison to how much you have available to you. In other words, creditors favor consumers who have a $3,000 balance on a credit account with a $10,000 limit over consumers who have a $3,000 balance with a $3,500 limit. As you pay down your debts, your credit ratio will improve. And while it may be tempting, no, you should not open new cards with the goal of increasing your credit ratio.
- Open a secured credit account. If you don’t have any credit cards and don’t qualify for getting a standard account, consider opting for a secured credit card. Secured credit cards require a refundable deposit, usually somewhere around $200-300. You then get a credit card that works like any other: You make purchases and get a bill for those purchases each month. Your credit limit will depend on how much you put down as collateral. The idea is to help you build credit while not posing a risk for the bank. Secured credit cards often offer people with bad or no credit lower annual fees and interest rates than unsecured (traditional) credit cards. Check out seven secured cards to consider from CNN Money.
- Ask family or friends for help. Can’t find an apartment because of bad credit? Ask a friend or family member to co-sign a lease for you. Being an authorized user on someone else’s credit card can also help you build credit. You don’t even need to make any purchases to benefit (and probably shouldn’t unless you’re certain you can pay your friend back immediately).
- Meet with a certified credit counselor. A debt counselor can help you create a financial plan and manage your debt. Find a certified professional through the Department of Justice’s U.S. Trustee Program.
- Be patient. Building credit takes time. Most credit delinquencies (late payments, Chapter 13 bankruptcies) stay on your credit report for seven years. But that doesn’t mean the needle won’t start to move before then if you’re vigilant. Stick to a budget, make payments on time and use credit wisely, and you’ll be on your way.
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Financial abuse is real and can hobble survivors trying to leave. But there are resources out there. Check out one of these financial assistance programs or visit the National Endowment for Financial Education’s Smart About Money page. You may also want to browse the many financial articles for survivors in our archive.
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