How to Build Credit after Domestic Abuse

Nearly all domestic abuse cases involve financial abuse, so taking control of your finances while you search for debt relief and build credit will be a vital part of starting over. 

On a positive note, there are a variety of ways you can build credit and work toward the happy, healthy, and financially secure future you deserve. 

The steps you take to build or rebuild credit will depend on where you start. If you've never had credit before, you'll need to build credit from scratch. The way to do that is slightly different if your credit was damaged. 

The first place to start is checking your credit reports.

Freedom Debt Relief isn't a Credit Repair Organization and doesn't provide, or offer, services or advice to repair, modify, or improve your credit.

How To Check Your Credit Reports

A credit report is a history of all of your credit behavior—accounts, payments, balances, etc.—that has been collected by a consumer credit bureau. There are three main credit bureaus used by most creditors:

• Equifax

• Experian

• TransUnion

You can visit AnnualCreditReport.com to check your credit reports. This is a legit site run by the credit bureaus, and it’s the only website authorized to give you the free credit reports that you’re entitled to by law. You're entitled to one free credit report from each bureau every week.

Your credit report can be different depending on the credit bureau, so it’s a good idea to check all three reports. This will give you a complete look at all of your credit accounts so you can make a plan to rebuild.

Any errors or inaccuracies should be disputed right away. You can dispute your credit report with each credit bureau online in just a few minutes.

If you don't have any credit accounts, then you probably don't have a credit score, either. Don’t worry. It’s very possible to build credit from scratch.

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How To Build Credit From Scratch

If you've never had credit before or haven't had credit in the last seven years, your first move is establishing your credit history. It takes at least six months of credit history to qualify for a credit score.

You establish credit by opening a credit account. Credit cards are an excellent option here. You could also be added to an existing credit account as an authorized user.

Build credit with a starter credit card

If you have a stable income, you can apply for an unsecured credit card (a credit card that doesn't require a deposit). Several issuers offer starter credit cards with no annual fee that you can qualify for even if you haven't built credit yet.

Use the card to cover a few small purchases each month, then pay the balance in full each month before the due date. After six months, you should have the start of a good credit history.

Gain credit history as an authorized user

If you have a trusted friend or relative with a strong credit history, you may be able to borrow that good credit to boost your own. You do this by becoming an authorized user on their credit card.

Many credit card issuers will report a card's payment history and utilization to the credit bureaus for the primary user and all authorized users. If you have no or very limited credit history, adding an established account with a long history can improve your credit score.

The downside is that if the primary cardholder misses a payment or overspends, it could impact your credit score, too. Similarly, if you use your account access to overspend, you and your friend could both wind up with a ding on your credit history (and potential relationship conflict as well).

How To Rebuild Credit That's Been Damaged

Negative items can stay on your credit report for seven years or longer (Chapter 7 bankruptcy can hang out for up to 10 years). The impact lessens over time, so the damage to your score will diminish as the negative item ages.

You could also reduce the impact of negative items by building additional positive payment history. A few missed payments in the past won't hurt your credit nearly as much if you've had a flawless payment history since then.

In other words, to rebuild your credit score, you'll need to have and use credit. 

This will mean getting new credit if you don't currently have a credit card or loan in your name. Getting approved for credit can be harder when your scores are low or you have no score, but it's definitely possible. Check out these options.

Get a secured credit card

A secured credit card can be an excellent option if you have at least $200 you can use as a security deposit. That deposit secures your credit line, lowering the risk for the card issuer. This makes secured credit cards much easier to get than unsecured cards.

When comparing your options, look for a secured credit card that:

• Has no annual fee. You shouldn't need to pay a fee for a decent secured credit card.

• Reports your payment history to all three credit bureaus. Most major banks do this for every card, but ask to be sure.

• Offers a grace period on interest fees. Most credit cards don’t charge you interest fees if you pay your balance in full before your due date.

A number of great secured credit cards also offer extras, like cash back rewards on purchases. Just don't let the prospect of rewards tempt you into overspending.

Only charge what you can afford to pay off that month. Pay your credit card in full before your due date every month. Keep this up, and you should see positive changes to your credit scores after about six months.

Use a credit-builder loan

Different from traditional personal loans, credit-builder loans are specifically designed to help you build a positive payment history. Instead of getting money up front and repaying it, you make regular monthly payments to the loan company according to your agreement.

Your payments will be reported to the credit bureaus. Once you've made all of your payments, you'll get your money back (minus any agreed-upon fees). Sometimes the lender disburses the money to you in installments as you pay down the balance.

Credit builder loans aren’t available in every state.

Credit-builder loans could help you build credit, and help you get into the habit of setting aside money each month. Keep up the savings after you've completed the credit-builder loan, and you could accumulate a nice emergency fund.

Apply with a co-signer

The whole idea behind credit checks is that the lender wants to know it'll get its money back. If your credit history isn't reassuring enough, you could have better luck applying for credit with a co-signer.

Choose a trusted friend or family member with a well-established credit history and good credit scores. It also helps if they don't have a lot of pre-existing debt.

Make sure you have a plan for repayment that you're certain you can manage. Co-signers are equally responsible for any co-signed debt. If you default on the loan, your co-signer could get sued, and you'll both have damaged credit.

Tips To Manage Your Finances While You Build Credit

Building credit is just one part of taking control of your financial future. You also should have reliable income, manage your bills, and stay on top of your budget. Here are some tips.

Automate your bills and payments

Paying your mortgage, rent, utilities, car loan, and other bills on time will help improve your credit score. Since most creditors report debts that are 30 days past-due to the credit bureaus, pay your bills as soon as you can. 

Keeping track of a dozen due dates can be a lot, especially when you're rebuilding your life. Automate what you can using automatic payments for your bills, utilities, and credit payments. Just keep an eye on your bank accounts to make sure you don't overdraw by accident.

If you’re struggling to pay your bills, you may want to start reducing your expenses and/or increasing your income. It can be hard to know where to start, so consider these ideas:

• Pick up a side gig. If you’re lucky enough to have a full-time job but could use some extra cash, a side gig may be worth it. Fortunately, options like delivering food and selling handmade items online are flexible, and you can make the gig work with the other demands of your life.

• Downsize or relocate. You may be able to cut your housing costs significantly by downsizing your space or relocating somewhere more affordable.

• Cut the extras. While cable, meals out, and a streaming service may help you feel good, they can lead to financial stress if you can’t truly afford them right now. Choose just one or two things that really bring you joy and save the rest for later in your financial recovery.

Make sure you have reliable income

A stable income stream that exceeds your bills is essential to building strong finances. It can also boost your self-esteem to have your own income. 

If you already have a good job that covers your bills, you're ahead of the game. Consider how you can grow your career and work on building your finances.

If you're in need of employment or looking for a second job, consider these suggestions:

• Connect with a local nonprofit. The U.S. Department of Labor has a list of resources to help you find job assistance, apprenticeships, and even how to sign up for unemployment benefits if you’re eligible.

• Update your resume. A well-written, compelling resume is key to landing interviews. Even if you don’t have a lot of work history, recent volunteer work, for example, can help you market your skills and experience. There is free advice on resume building available, or if you have the money, you can get professional help as well.

• Consider education. Taking a few courses at a community college or even going back to school part-time or full-time to earn a degree may be a good choice if you have limited work history or have been out of the workforce for a long time.

Create a budget (and stick to it)

Building credit is largely based on paying your bills on time and reducing your debt. That’s where a budget comes in. A budget can help you take control of your financial situation. 

If you’ve never budgeted before, here are some budget methods you can try:

• Line-item. With a line-item budget, you list out your expenses over a year. As you go through the year, compare current expenses to previous ones to ensure you’re on track. If you use this technique, make sure you add a savings line item into your list of expenses so that you remember to save.

• Pay yourself first. Paying yourself first is a budget process that lets you allocate a certain percentage of your income toward your savings as soon as you get paid. Rather than focusing on tracking expenses, this budget makes saving money a priority. Don't use this method unless your income is more than your expenses.

• Envelope. The envelope budget can help you stay on budget for cash expenses like groceries, gas, and other household expenditures. You keep specific amounts of cash in different envelopes, each assigned to a different expense. Once an envelope is empty, you’re done with spending in that category for the month. You can find digital budgeting apps that use a similar method if you'd rather not use cash.

• Zero-sum. The zero-sum budget assigns a specific job to each dollar of your monthly after-tax income. It forces you to think critically about what’s important to you, and how you want to spend your hard-earned cash.

Help Is Available

You don’t have to build credit and gain financial health on your own. Fortunately, there are a variety of resources that can help you get on your feet:

• Nonprofit domestic violence organizations. The National Network to End Domestic Violence offers a directory of local nonprofits that provide aid to people who have experienced domestic violence.

• Credit counseling. Nonprofit credit counseling agencies can provide you with financial help, including helping you build a budget, repay debt, and build credit. The NFCC can help you find a certified credit counselor.

• Local food banks. If you’re having trouble putting food on the table, don’t hesitate to turn to a local food bank for help. You can find a food bank in your area through Feeding America’s search tool.

• Government assistance. Several federal benefit programs may support you after you’ve left an abusive situation. Look into the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and Medicaid.

If you’re experiencing domestic violence, please seek help, it’s available 24/7. Visit the Domestic Violence Hotline website or call 1-800-799-SAFE (7233).