How to Apply for a Credit Card When You’re Unemployed

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When you’re unemployed, applying for a new credit card is probably one of the last things on your mind. But even when you don’t have a job, you might still need a card for the security, convenience, rewards and benefits it offers. If you’re eyeing a new piece of plastic, read on to learn how to apply for a credit card, despite your situation.

Reporting Income

Not having a job doesn’t preclude you from being able to repay a loan. In fact, when asked to provide your income, you are permitted to include many sources besides a day job. Retirees can include income from Social Security or investments, while others can list disability payments. Alimony and child support payments may also be mentioned.

Married applicants can list any household income they have access to, even if they’re unemployed. Originally, the Credit CARD Act of 2009 prevented using household income on a credit card application, in order to prevent adult children from applying for a line of credit using their parent’s income. However, this rule had the effect of denying credit to non-working spouses, so it was later amended to permit applicants to use their spouse’s income, so long as they have access to it.

Other Ways to Apply

If you don’t have a lot of income or it’s not high enough, you still have some options. One is applying for a secured credit card, which works much like standard credit cards but requires a refundable security deposit in order to start the account. Nearly all secured card applicants are approved so long as they can verify their identity and have no pending bankruptcies.

Once a secured card account is open, cardholders receive monthly statements and are expected to at least make the minimum payment before it comes due. When they carry a balance, secured credit card users incur interest charges at the rate noted by their issuer. Secured cards typically offer the same security and convenience of standard credit cards; many also feature travel insurance and purchase protection benefits.

Another option is having someone co-sign your application. When you do that, both applicants become individually responsible for repayment of charges. If one doesn’t pay, the other becomes responsible.

Finally, some credit card users simply become authorized users on another person’s account. Just remember, the primary cardholder is always responsible for repayment.

Credit cards are an essential tool for many Americans, even those who are unemployed. By using all possible sources of income or taking a different route altogether, you’ll increase your chances of getting that new piece of plastic.

If you’re considering adding a new credit card to your wallet, be sure you know where your credit stands first, as this will determine the types of rates you may qualify for. You can view two of your credit scores, updated monthly, for free on Credit.com.

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I’m 27 & I’ve Never Had a Credit Card. Should I Get One?

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Considering all the debt disasters young people witnessed and read about during the financial crisis, it’s unsurprising that credit cards aren’t a popular financial product among today’s 20- and 30-somethings. Several surveys of millennials have found that consumers that age are often debt-averse and favor other forms of payments over credit cards.

As someone who falls into that age group, I know a lot of people who meet that description. One of them recent sent me a text asking if he should change his approach:

“I’m 27 years old. I never had a credit card. Do I need one?”

Most people don’t need credit cards. You can function just fine in society without a credit card (some would argue you’re better off without one), and they’re not the only means to establishing a good credit score. But they can be incredibly helpful.

Whether or not someone in this situation should get a credit card depends on a lot more than their age. If you’re having similar thoughts and are wondering if you should apply for a credit card, here are some questions you need to ask yourself first.

1. Do I Have Any Credit?

One of the biggest reasons to get a credit card is to help you build credit. Without credit, getting an auto loan can be extremely difficult, and getting a home loan is pretty much impossible. It’s very common for young people to start building a credit history when they take out student loans or get an auto loan with the help of a co-signer, but if you don’t have any credit history, you need to start somewhere.

People who need to start building credit or rehabilitate bad credit often choose to get a secured credit card as a way to establish good credit behavior, because secured cards, which require you to put down a deposit that serves as your credit line, are generally easy to get. Once you have the card, you’ll want to keep your card balance as low as possible and always make payments on time.

If you already have a credit history, you can still benefit from getting a credit card, because having a variety of credit can also improve your credit score. Using a revolving credit line can add depth to a credit file with a student loan in it, and if you pay off the credit card balance each billing cycle, you’ll be building credit without incurring debt.

2. Do I Have Any Savings?

Credit cards also serve as a good emergency tool. Ideally, you have an emergency fund to cover your expenses in the event of a sudden income change or major, unexpected car repair, but if you don’t, a credit card can help you make ends meet in a pinch. In that case, you’d want to use a credit card with a low interest rate and immediately make a plan to pay off the balance as soon as possible. Credit card debt can quickly get out of control and end up taking years to repay, if you’re not careful.

3. Can I Handle a Credit Card?

Having a credit card requires a lot of self-control and some organizational skills so you don’t spend beyond your means (and end up in debt) or miss payments (and end up with credit damage). If you decide to get a credit card, take the responsibility seriously. Keep track of your transactions, set bill-pay reminders or automatic payments to make sure you don’t miss your due date and keep an eye on your credit scores to see how your credit card use affects your credit standing. You can get two credit scores for free on Credit.com every month to track your progress as you build a good credit score.

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I Have Ridiculously Bad Credit. Can I Get a Credit Card?

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Is your credit so bad you get pre-declined credit card offers in the mail?

OK, that’s a joke — a bad joke — but bad credit is obviously no laughing matter. It can keep you from accomplishing your personal financial goals, and it can be expensive. People with bad credit typically pay higher interest rates, higher insurance rates, can be turned down for jobs and rental housing and, of course, can have a hard time getting a credit card.

In general, credit scores below 600 (on a scale of 300-850) are considered “bad.” Here’s a quick breakdown:

  • Excellent Credit: 750+
  • Good Credit: 700-749
  • Fair Credit: 650-699
  • Poor Credit: 600-649
  • Bad Credit: below 600

If you’re in the bottom category, don’t despair. Not only can you improve your credit score to get a credit card, a mortgage or other financial dreams down the road, chances are you can get a credit card right now to help you on your way toward that better credit score.

The first step is knowing what your credit score is and whether everything on your credit report is accurate. (If you don’t know where your credit score stands, you can pull your credit reports for free each year at AnnualCreditReport.com. You can also view your credit scores for free each month on Credit.com.)

If your bad score is valid, you can work to improve it by getting accounts out of default, paying down high credit card balances and limiting new credit inquiries.

Your Options

Once you know where your credit score stands and you’ve corrected any errors, you can look at applying for credit cards created specifically for folks whose credit scores need some improvement. Most likely, you’ll need to start with a secured credit card from a reputable bank that has a reasonable annual fee.

Secured credit cards can be helpful for people trying to fix their credit or establish a credit history for the first time. Issuers negate some of the risk of doing business with such consumers by requiring a deposit to open the account. That deposit serves as the cardholder’s credit line, and beyond that, the card works like most other credit cards: You make purchases, and every billing cycle, you make a payment. If you don’t make your payment, however, the issuer can take your deposit.

Remember, your bad credit doesn’t have to last forever. Most negative information stays on your credit report for seven years (bankruptcy may remain on your report for up to 10 years). And the sooner you start establishing and maintaining solid lines of credit, the sooner you can improve your credit score, and your ability to get a non-secured credit card.

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