How to build credit after leaving abusive spouse
By Erica Sandberg
September 23, 2014
My cousin “Janet” is finally leaving her husband after 12 years of marriage. We have told her time and time again to leave. He is abusive and controlling. Crazy. We called the cops because he beat her up so badly; he spent two weeks in jail. Now, she has really left. The reason I'm writing to you, Erica, is because she has nothing in her name. Janet has not had a bank account in 12 years. No credit cards. The house and cars are in her husband's name. When he bought the ATVs, he used his credit. She is in her 40s, has no job, but she is looking. Will banks give her a chance with bank accounts and credit cards? I will help her in any way I can, too. —“Bess”
What relief that your cousin is finally free from her abuser. Although it's ideal to leave with funds in a bank account, a wallet equipped with a credit card or two and a credit report that indicates years of positive borrowing, that's just not the case. Like millions in her position, she has to start fresh and work her way up from where she is today.
Janet's initial step is to not presume that she has a blank credit history. It's entirely possible that her husband (illegally) helped himself to her identity, then opened accounts in or with her name. Have her log on to AnnualCreditReport.com so she can order her reports from each of the three major credit reporting agencies to check what is being listed.
If she does see evidence of fraudulently opened loans and lines of credit, she will need to file a police report, dispute them and add a fraud alert to her file. She can learn more about fraud alerts on the major credit bureaus' websites, at TransUnion, Equifax and Experian. If the lenders can't prove that the accounts are hers, the line items will be removed. This is important to do even if the information is positive. Credit reports should only contain true and accurate data. If the credit bureaus don't budge, she'll need to contact the lenders to fight it out with them, then dispute again. It's time consuming, but necessary. It's important to file disputes by mail, rather than online, because you might be accepting arbitration if you file online, and that means you may not be able to challenge a credit bureau's decision in court. (You can file a dispute by mail at TransUnion, Equifax and Experian.)
Once Janet is sure her credit is clean, she can launch a powerful economic life. Here is what she should do:
- Secure employment. Earning her own money is crucial, so she's right to concentrate on job hunting. When the paychecks start flowing in, she can begin to support herself. Just as crucial is that she'll gain a special kind of self-esteem that only comes from making her own money.
- Open a bank or credit union account. Janet doesn't need permission from anyone to open a checking and savings account. Just about any adult can and ought to have both. Have her visit her local bank or credit union branch and talk to a manager. After the accounts are set up, she can avoid expensive checking cashing establishments, get a personal debit card to swipe and set cash aside for the future.
- Apply for a secured credit card. It is a good idea for Janet to have a credit card, and although you could add her as an authorized user to one of yours, it's better for her to be the sole owner. Her thin credit file means she's a risk to lenders, so after she can scrape together a few hundred dollars, she should apply for a secured credit card. It's just like a regular card, but if she doesn't pay what she owes, the issuer can tap into the funds held in reserve. Before applying, make sure the issuer reports to the credit bureaus. Most but not all do.
- Charge responsibly. So that Janet can stay out of debt and build a positive credit history, she needs to use the account perfectly. Have her charge one small monthly expense. By paying on time and in full each month, in as little as a year, she'll have created a respectable credit rating and may be able to qualify for an even better product.
And that's the easy part. The far tougher tasks involve overcoming the damage done by extended domestic violence. Thankfully, there are many fantastic resources available, and you don't have to shoulder the burden of providing her with all the guidance she needs. Have her check out the Allstate Foundation's Click to Empower Program, which focuses on the unique financial and credit issues that women escaping abuse often have to deal with. I wish you both the very best.
Got a question for Erica? Send her an email.