Saturday, June 14, 2014

How to Protect Your Credit While in Prison

Headed to prison? Protect your credit scores!
Earlier this week we discussed the basics about debt and incarceration. Fortunately, there are ways to protect your credit while in prison (to some extent, anyway) and that's what we need to address today.

.If you're headed off to prison, your credit is probably near the bottom of your laundry list of concerns. If you don't take precautions, however, you could end up with a disastrous credit history when you finally end up back on the outside. If getting a good job with a prison record isn't difficult enough, tacking on bad credit makes finding gainful employment that much harder. If you take preventative measures to minimize the damage, you can protect your credit for the day you get out of prison and rejoin society.

Pay Off As Much Debt As Possible Before Being Incarcerated

For many convicts, imprisonment is a surprise. After being arrested, inmates who are unable to post bond may spend months in jail awaiting trial. If you're found guilty, you're then hauled away to prison. If you're one of the lucky ones who manages to make bail or you plan to self-surrender, now is the time to get your affairs in order to preserve your credit during incarceration.

If you're financially able, paying off as much of your debt as possible before going to prison is a must--especially if you don't have someone on the outside willing to make payments for you during your incarceration. When a debt is paid off, you don't have to worry about a slew of nonpayment notations, charge-offs and eventual collections showing up on your credit report and destroying your credit score. Remember: your creditors don't care that you're in prison. They just want to get paid.

Don't Close Credit Cards While In Prison

Paying off your debts before entering prison is commendable and can protect you from the credit consequences of default, but the effect any account has on your credit report lessens as that account ages. As long as your credit card accounts are open (and receiving payments) they don't "time out" and fall off your credit report. An open credit card can remain on your credit report indefinitely. If you've got someone on the outside making the payments for you, this works in your benefit.

If you pay off your debt and close the account it immediately begins to "age." As it ages it has less impact on your scores and, if the account was in positive standing when it was closed, your credit scores will begin to decline. Closing the card also hurts you by eliminating the available balance. Part of the FICO scoring
Don't close credit cards before being incarcerated
formula depends upon comparing the debt you carry to the available balance. This is known as your debt-to-limit ratio. By closing a card and eliminating this available balance, your debt-to-limit ratio increases and your credit scores decrease.

Get Help With Your Debts While Incarcerated

One of the best ways to protect your credit from harm during your prison term is to have someone on the outside pay your bills for you while you serve your time. This option isn't available to everyone, but if you have the money available, you have the option of allocating a portion of that to a person you trust in order to help you pay your bills each month and preserve your credit scores.

If you have the funds but lack a trustworthy person to help you pay the bills, signing up for automatic bill pay is also an option. This allows your creditors to deduct your payments directly from your bank account and prevents you from falling behind on your bills while incarcerated. You also have the option to award a trusted friend or family member temporary power of attorney over your affairs. This gives that individual the ability to do your banking and take care of any issues that pop up while you're stuck in prison--preserving your financial stability and your credit for the day when you return to the outside world.

Related Posts:

What Happens to Your Credit When You Go to Prison?

Improving Credit Scores After Collections

Remove Late Payments: How to Write a Goodwill Letter That Works

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