Can You Get A Credit Card If Unemployed?
Building a good credit score is incredibly important in life. It sets us up for the things we most need in life such as mortgages and cars, if we ever need a line of credit.
The thing is, lenders have to assess whether or not you are suitable for them to give a line of credit to. Normally, you’d need to have a salary or other regular forms of income for a lender to consider you for one of their credit cards.
So, what do you do if you’re unemployed? Can you get a credit card?
We’re going to explore that for you in this helpful walk through.
Overview
Yes. You can get a credit card if you’re unemployed. The lenders look more at your income and expenditure rather than what sort of job you have. Being unemployed doesn’t necessarily mean you have no income, so this is something you’ll need to declare when you’re applying for a credit card.
The Credit Card Act of 2009 allows you to note down any source of income which you have a reasonable amount of access to, as long as you are 21 or over. This is incredibly helpful for certain people who might have a good credit score, a student or a regular form of income from another source.
Students also might face this problem, but some may be 21 or younger. In which case, they have other options which we will come to later.
What Qualifies As Income?
Although jobs are the most common form of income, they’re not the only ones. Some other acceptable forms of income might include:
- Social security check
- Unemployment check
- Investment returns
- Royalties
- Student bursaries/grants
- Money from spouse or other family members regularly
- Regular repayments from a previous loan you’ve provided
This will all be subject to the lender’s discretion but generally, these are the forms of income you can expect to provide/list.
What About Students?
Being unemployed might mean you are a student. However, many students receive bursaries, grants and other scholarship payments. They may also receive financial assistance from their family, sponsor or somewhere else.
It’s entirely possible for students to apply for credit cards even if they’re unemployed by applying for a student credit card. They are generally a low credit limit but they’re a great way to get the foot on the credit ladder.
What If My Income Isn’t Enough?
If you don’t earn enough income for a lender to accept you for a credit card, there are still some other things you can do. The potential options are:
Secured Credit Card
A secured credit card is when you apply for credit secured against something as collateral. For example, a secured loan is normally a loan secured against your house – allowing the lender to take possession of your house, should you default on repayments.
Generally, secured credit cards will require a deposit as collateral – so failure to make repayments will be taken from that. The only way to retrieve your deposit is by closing the account (with $0 balance) or by upgrading to a regular credit card.
A Guarantor/Co-Signatory
Sometimes, lenders don’t quite trust the person enough to provide a line of credit. However, the rest of their application might be fine enough. In these instances, lenders might agree to provide credit on the basis of a co-signer or guarantor.
In the event that the debtor cannot or will not pay what they’ve agreed, the creditor will seek restitution from the co-signatory. The co-signatory should have a good credit score with a regular income for the proposed credit to be agreed in normal circumstances.
Be An Authorized User On Another Card
If you have a family member, spouse or very good friend that would be prepared to – you can become an authorized user on their credit card. This will allow you to use the same credit limit as them with all the same benefits that the card might have.
However, be aware that failure to meet repayments – the onus is on the primary user. So, to avoid broken relationships or other problems – be sure to make a sensible payment plan before moving forward with the application.
Is It Wise To Apply For Credit While Unemployed?
Our lives now revolve around credit for us to get on. However, there are times when obtaining credit might be more of a hindrance than a benefit.
In this instance, it will depend on your personal circumstances. If you’re unemployed but you know you have a regular source of income that is stable and unlikely to change – applying for a credit card is a good idea, assuming you are responsible enough to deal with the card.
However, if your income is not stable or you believe it will change any time soon – you’re better off avoiding applying for a credit card. The chances are, you will end up using more on the card than you can afford to pay off in a timely manner, leading to interest payments and more debt.
Think about why you’re applying for a credit card in the first place. If you’re trying to get a credit card due to previous debt, you might be better off getting a debt consolidation loan with an agreed amount that you can afford to pay off every month. However, if you have irregular income – you might find the difficulty is the same as applying for a credit card.
If you’re looking to build your credit, you’ll likely start with a low credit limit, which is a good thing. It’s wise to spend very little to keep credit utilization low and boost your credit score every month. Even unemployed, you could make a 10 dollar purchase each month on your card only, and then pay this off in full the month later.
If you were looking for a credit card for any other reason, it is probably best you do not do so.
The Overall Point
Yes, you can apply for a credit card whilst unemployed but it may be difficult, depending on personal circumstances. Check your options before making an application.
