Have you lived overseas for a few years? Gotten married and gotten by on your spouse’s credit accounts? Have you cut up your credit cards and just paid with cash or your debit card for a good number of years?
If this is you, your credit record may have gone “poof!” and your credit score may have disappeared. Here’s how.
When Traveling & Living Abroad
If you made the leap to living in a foreign country for several years and closed out all of your U.S.-based credit cards and loans before you left, your credit history could be fading away. That’s because your U.S. credit reports only report U.S.-based credit.
To keep your credit reports active, maintain an active American credit card account that you use for a couple of routine purchases each month. Choose a card without foreign transaction fees and pay balances in full to build credit without acquiring debt.
Living on Your Spouse’s Credit
Falling in love and getting married is great — but make sure your finances are covered for the long haul, too. Giving up your own credit accounts and living off your spouse’s credit (including not having any joint credit accounts) is a sure way to get your credit score to disappear over time. Think of it this way: If something should happen to your spouse and you have no credit history in your name, you will have a tough time qualifying for a credit card, let alone getting a mortgage or car loan on your own. So keep at least one credit card account in your own name and keep it active, paying the balance in full. Just a couple of small purchases each month will do the trick.
Cold Turkey on Credit
Did you need to cut up all your credit cards as part of a debt management program? Did you move and decide to live a pay-as-you-go life for awhile, using cash and debit cards for all your expenses? If you’ve gone cold turkey on credit, your credit scores will still be active for a while, but if you’re doing it for years at a time, you could lose your credit scores.
Simplifying your finances is great, but if you need a home loan or auto loan at some point in the future, you will want to find a way to keep your credit intact as well. Having no credit score or an especially poor credit score can cost you tens of thousands of dollars in your lifetime (you can crunch your own lifetime cost of debt here).
How to Get & Keep Credit
It can be impossible to qualify for credit on your own if you don’t have an active credit file.
So let’s look at the lifespan of your credit history. Positive credit information stays on your credit record for 10 years. Negative information sticks around for seven (though some negative information can stay on your report longer). So if you haven’t had an active account for 10 years or longer, you may have to start over with your credit.
The good news is if you had a healthy credit record once, there’s no reason you can’t have one again. It’ll just take some time – and a little effort – to get there.
A secured credit card is a great tool to start rebuilding your credit. You’ll need enough cash to put on deposit to secure yourself a small credit line and then you are ready to get to work on re-setting your credit. Once you’ve established a long enough history of on-time payments on your secured card, you can “graduate” to a regular credit card — check with your issuer for guidelines.
Once you’ve started using credit again, you will need the following to have a credit score, according FICO:
- At least one account that has been open for six months or longer
- At least one undisputed account that has been reported to a credit reporting agency in the past six months
Not sure where your credit stands? You can get a free copy of your credit reports once a year from AnnualCreditReport.com. You can also see two of your credit scores for free on Credit.com every month.
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