A fresh start: How to rebuild credit after prison


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Serving a prison sentence is incredibly difficult. While in prison you’re likely just thinking about getting through the day, but you should also consider what’s happening with your finances during your sentence.

Incarceration has long-term effects on your credit and your ability to get back on your feet after release. Unpaid bills, for instance, can lead to your accounts being closed and your credit score taking a nosedive.

While this picture is pretty grim, it doesn’t have to be your story. There are ways to both tend your credit while behind bars and rebuild your credit once you get out.

What happens to your credit in prison

Martin Lynch, director of education at Cambridge Credit Counseling, a nonprofit credit counseling agency, estimates that at least 80 percent of inmates fall behind on bills for credit card debt, medical payments, cell phone and cable TV services.

Failure to pay bills can result in your service provider closing your accounts and sending the debt to a collection agency. This non-payment is then reported to the three major credit bureaus, which can negatively impact your credit score.

If you don’t have any debt going into prison, your accounts may be closed due to inactivity, depending on your creditor. This will impact your credit score negatively by shrinking your credit history and increasing your credit utilization ratio.

Many prisoners also deal with identity theft, Lynch says, either from a situation such as a relative using their information or from the prisoner selling their personal data to other inmates.

Maintaining credit while in prison

There are steps you can take to maintain your credit while in prison. It will take some work, but it can also help you avoid some huge financial headaches when you get out.

Start before you go in

The first step to maintaining your credit while in prison starts before your sentence begins. Contact your creditors and keep them informed about what is happening with your case. Let them know that there is a possibility that you will be serving time. Once you know the length of your sentence, let your creditors know this information as well. Pay off as much debt as you can before going in.

Ask someone for help

Seek out a trusted friend or family member who is willing to handle your accounts during your time in prison. You can transfer legal authority to them to manage your accounts during your term and notify your creditors of the change.

Set up power of attorney

If you don’t have a friend or family member who can handle your accounts, you can manage your assets through a trust instead.

Dennis Dwyer, a criminal and DUI defense attorney in Bridgeview, Illinois, suggests giving power of attorney to a financial professional and putting your money in a trust. According to Dwyer, trustees have a legal obligation to make financial decisions that are in your best interest. This option makes sense if you have a large number of assets to manage.

Request a credit report

While it does require a few additional steps, it is not impossible to get a credit report while in prison. Having access to your report can help you keep tabs on what is happening with your credit. You can find more information about how to get a credit report while incarcerated from Experian.

Check prison resources

Finally, determine whether the facility you’re in offers access to credit and financial counseling through a transition program. This could allow you to maintain or begin rebuilding your credit while incarcerated, making it easier to continue the process upon release.

Rebuilding credit after release

Once you’re out of prison, continue working to get your credit score back to a good place. A good credit score is important to accessing a number of financial products in life, from credit card approvals to competitive loan rates. Whether you want to rent an apartment or sign up for a cell phone, your credit will come into play, which is why it’s important to keep it healthy.

Monitor your credit report

Improving your credit starts with knowing where you stand. If you weren’t able to request a credit report while in prison, get one now.

You can get a free credit report from any of the three major credit bureaus (Experian, TransUnion and Equifax) or use Bankrate’s credit reporting tool, which will give you tools to improve your credit and notify you of changes to your score.

Settle any delinquencies

Figure out which of your accounts were sent to collections during your sentence and how much you still owe. Pay off the smaller debts first to get those accounts resolved and help increase your credit score.

If you’ve served a long sentence and your accounts are approaching your state’s statute of limitations, it may be in your best interest to consult an attorney before taking any actions. You can also seek help from a local legal aid office.

Create a budget

Developing a budget will not only put you in a better position to pay off your debt, but it can also help you plan for your future. Once you’re released, you’ll likely need to prioritize saving money for housing, personal transportation and a reliable cell phone, all of which can be yours if you have a plan in place.

Start small with new credit

While you may be tempted to take on several credit cards at once in order to build credit, it’s more beneficial to start slow and add accounts as you need them.

If you’re unable to qualify for a credit card on your own, ask a trustworthy, reliable family member to add you as an authorized user on their account instead. If that isn’t an option, you can use a secured credit card to make small purchases and build up your score.

Bottom Line

Incarceration can send your finances into a tailspin, but you can bounce back. Do as much as you can to stabilize your accounts before you go in, take advantage of any financial counselling services while you are serving time and be diligent about building your credit back to a good place after release. It is possible with a bit of work and attention.