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How to recover from poor credit scores

June 6, 2014
Ask Erica
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QHi Erica,

I have been married twice, and I now don't have very good credit. I want to get my credit built up again, but I don't how. I have looked at my score and it is below 600, so it's not too bad. If I got a credit card, it would help me get my score up. But I don't know which one would work for me. My only income is my Social Security Insurance, so I have very limited income. Do you think you can help me? –Diana

ADear Diana,

Yes, I can help — by encouraging you to help yourself. A commitment to independence is paramount. Here are the tools you'll need to get there.Ask Erica

Tool 1: Credit score education

A FICO score under 600 is, in fact, in the “bad” range. (I presume you're referring to this credit scoring system since it is the predominant one.) The FICO scale ranges from 300 to 850, and yours is at the bottom.

Now, figure out the reason why your scores are so low. It could be because you have old, jointly held accounts on your report that have been paid late or are in default. Get a free copy of your credit report from

As for the rest of the scoring scale, 600 to 649 is considered poor; 650 to 699 is fair; 700 to 749 is good; and anything above that is excellent. For your numbers to climb, you'll need to add positive data to your reports. Payment history is the most important scoring factor, making up 35 percent of your score. Then, in descending order, the factors are low-debt-to-credit limit (30 percent); length of credit history (15 percent); types of credit in use (10 percent); and inquiries (10 percent). In short, by actively borrowing and repaying on time and in full, your scores will rise.

Tool 2: Credit card guidance

Charging with a credit card and paying it off each month are the speediest ways to bring a FICO up. However, with your scores and no income except Social Security Insurance, getting one might be tough.

I usually suggest secured cards to people with bad credit ratings because they are easier to qualify for than unsecured cards. But issuers still need assurance that you can make your payments. Since Social Security Insurance is for those who need cash to pay for essential expenses, you might be too much of a risk to be considered.

Still, it is worth a try. There are cards designed for people who have credit scores in your range. Because inquiries are a scoring factor, too many applications for credit in a short span of time will knock some points off, so go slowly. Apply for the one you think you truly qualify for. If you're approved, fantastic. The card will almost certainly come with a low charging limit, so buy one small thing a month and pay off the balance when the bill comes in.

On the other hand, if you're turned down repeatedly, stop. You owe too much or your other credit problems are too severe. If you can't repay a big balance or do anything else to change the data that's appearing, wait. Most negative information drops off after seven years. Or forget having a credit card at all. A debit card and cash may be your best bet.

Tool 3. A livable budget

Do you know exactly how much it takes to keep your household running? Do you have enough in SSI benefits to make it all work? List all expenses and subtract them from your income. The goal is to have at least enough to live comfortably. Prioritize. Food, shelter, utilities, transportation and medical care come first. You may have to make some hard choices.

If you get bogged down with this assignment, get assistance from the professionals. A credit counselor will  talk with you for free, either in person or over the phone, and draw up a workable spending plan. They will also give you a list of available resources, such as special phone and utility assistance programs for low income individuals. You can find an accredited agency via the National Foundation for Credit Counseling and theAssociation of Independent Consumer Credit Counseling Agencies.

Finally, take a vow of financial sovereignty before ever taking marriage vows again. Always have your own banking accounts, know what is going on with jointly held and personal credit cards, and address minor money issues before they become major economic problems.

Got a question for Erica? Send her an email.




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