Can I Apply for a Credit Card If I’m Unemployed?

If you’ve been laid off recently, applying for a new credit card may help you temporarily.

In the event of an emergency, a credit card allows you to buy everyday expenses or even basic necessities like groceries, until your normal cash flow resumes. And if you use your 0% APR credit card while you work, you can even finish without incurring interest.

While the best advice is to have emergency savings ready for situations like the coronavirus pandemic, sometimes it makes sense to get a credit card after recent unemployment — but how? How do you qualify for a credit card if you don’t have one. have a job?

“It’s hard,” financial expert John Ulzheimer, formerly of FICO and Equifax, told CNBC Select. “You don’t need the ‘work’, but you need the ability to pay.”

Under the CARD Act of 2009, credit card companies are required to review an applicant’s “solvency” before issuing a new credit card, or even increasing the credit limit. This is meant to protect consumers from taking on more debt than they can repay.

However, income is not always in the form of traditional compensation such as wages, salaries and tips. There are other forms of income that can be counted if you decide to apply for a credit card during a time of crisis.

Below, we break down other forms of income you can include in your credit card application to qualify – and three ways to continue building your credit if your current income you are not enough.

Earnings from work are a clear demonstration of your ability to pay your credit card bills. But if you don’t have a job right now, there are other qualified forms of income you can include.

Other forms of non-wage income that you can list include:

• Your investment return
• Rental property income
• Trust Fund Payments or Inheritance
• Any child support you receive
• Payments to your family received
• Social Security Payments
• Public support
• Distribution of retirement

If you lost your job and you are receiving unemployment benefits, you can also count unemployment benefits as income on your next credit card application. Because unemployment benefits are taxable, the IRS treats it as income (or “fully taxable benefits such as wages”) — which means credit card issuers often are, too.

The Consumer Financial Protection Bureau (CFPB) states that card issuers must consider “a consumer’s ability to make the required minimum recurring payments under the terms of the account.” based on the consumer’s income or assets and the consumer’s current obligations.”

This means that card issuers are required to verify your ability to pay, but you can list any of the above forms of income that you currently receive. It is unlikely that the card issuer will ask you for proof of income, such as tax forms, unless you are a young borrower. But the best way is to be honest so that your credit line is appropriate. You’ll want to make sure you can afford the minimum payments and don’t go into debt.

Even if you were recently laid off, you can claim the income of your working spouse or partner if you file your taxes as a household.

“If your spouse works, then you are allowed to include household income in your application,” Ulzheimer said.

This is not always the case. Ulzheimer notes that when the CARD Act first became law in 2009, the “household” income provision was not included in it – essentially leaving any non-working spouse or spouse or husband at home does not have a credit card.

If your income isn’t enough for you to qualify for a credit card on your own, there are several options. Below, we turn to credit specialist Beverly Anderson, Equifax’s president of global consumer solutions, to help you learn about each solution.

1. Get a co-signer: “A co-signer is someone who agrees to be legally responsible for repayment if the borrower doesn’t pay back the loan as agreed,” Anderson said. This could be a parent, legal guardian or spouse, but save Note that they are just your backup. Not all card issuers allow co-signers, but some do. For example, the Bank of America® Cash Rewards credit card allows cardholders to co-sign. name and offer 3% cashback in a category of your choice, 2% cashback at grocery stores and wholesale clubs (up to $2,500 in a mix/grocery/club selection category) wholesale kit on quarterly purchases, then 1%.) To find out if your preferred card issuer allows co-signers call customer service and ask.
2. Become an authorized user: “As an authorized user on someone else’s credit card account, you will receive a credit card in your name, linked to the account owner’s credit card account,” says Anderson. main. Consider asking a friend, partner, or family member if you can be added as a user to one of their credit cards.
3. Get a secured credit card: This is a good way to build credit if your score is already up or if you’re just starting to build credit, and secured credit cards are often easier to qualify with with less stringent income requirements. than. However, you need to have enough disposable savings to make a deposit. “A secured credit card requires you to pay a deposit upfront, which can be the same amount as your credit limit,” says Anderson. Usually, secured cards have a lower credit limit and are used judiciously to build good credit habits and increase your score. Your security deposit is usually refundable when you upgrade to an unsecured credit card, assuming your balance is paid in full.

CNBC Select’s top pick for the best secured credit card and best starter credit card is the Discover it® Secure Credit Card because cardholders can earn cashback as well as rewards. suitable welcome bonus at the end of the year (for new card members for the first year only). The Capital One Platinum Secured Credit Card is the best for low security deposit upfront payments (as low as $49, based on your credit) and Platinum® secured credit cards from First Tech Federal Credit Union is the best card for high credit limit (the higher is $25,000, equal to your deposit).

Before you decide whether to apply for a credit card after being laid off, it’s important to understand how each of the options above can affect your and/or your co-signer’s credit score. you or add you as an authorized user.

“It’s hard to prove that you’ve exhibited responsible credit behavior when a lack of credit history means you can’t get credit — that is, a loan or credit card,” says Anderson. “However, building a credit history takes time, and responsible credit habits translate into a positive credit history.”

And if you don’t get a credit card during this unemployment, ask about reporting your on-time rent, mortgage, utility or cell phone payments to the credit bureau for they appear on your credit report and potentially increase your FICO Score ® (features like * Experian Boost ™ and Experian RentBureau can help do this). Some card issuers may consider these payment obligations when you submit your application.

Information about the Bank of America® Cash Rewards credit card, Capital One Platinum Secured Credit Card, and Platinum Security Credit Card® from First Tech has been independently collected by Select and has not been obtained by the card issuer. reviewed or provided prior to publication.

*Results may vary. Some may not see improved scores or approval rates. Not all lenders use Experian’s credit profile, and not all lenders use scores affected by Experian Boost.

For Discover it® Secured Credit Card rates and fees, click here.