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Life can be difficult without the convenience of a credit card – but if you are just starting out on your own and have no job yet, or you’re down on your luck and currently unemployed, will you be able to qualify for a credit card? The answer is yes, within limitations.
When credit card companies evaluate your application, they are assessing the likelihood that they will be paid back. While the income from a job is an excellent predictor of solvency, there are other methods you can use to show the credit card issuer that you pose limited risk.
Without a job, what income sources will you use to pay the bills? If you have a predictable income stream such as alimony payments, Social Security/retirement benefits, or annuities, it will be easier to secure credit even with a lack of employment income. Assets such as savings accounts will also help, but without an obvious means of replenishing those savings, credit card companies may balk at extending credit to you.
If there’s no regular income stream to report, you must provide some other form of backing from a person or an asset that gives the credit card company recourse if you fail to pay.
You can usually qualify for a secured credit card by providing an upfront deposit, which typically equals the credit limit of the card, so you are effectively “borrowing against yourself,” says Financial Educator Tiffany “The Budgetnista” Aliche. The card issuer will keep the deposit if you default on your payments, and will refund the deposit whenever you close or upgrade the account.
A secured card is an excellent way to build your credit history, which is why Aliche calls it “a credit card with training wheels”. If you use a secured card responsibly over several months, card issuers may offer an upgrade to an unsecured card – although it’s less likely that you’ll receive an offer for an unsecured card if you still don’t have a job.
A family member or friend with a good credit score can provide backing by co-signing your credit card application or adding you as an authorized user on their existing credit card account. In both cases, the family member/friend assumes some responsibility for your charges.
As an authorized cardholder, you will be issued a card with your name on it, but the existing cardholder has primary responsibility for paying the bills – so you will need to work out a payment arrangement to reimburse the existing cardholder. With a co-signer, you have the primary responsibility for paying the charges, but your co-signer accepts legal responsibility for your bills if you fail to make payments.
It’s possible to build a positive credit history under any of these scenarios, but only if the credit activity is reported in your name to the three major credit bureaus (Equifax, Experian, and TransUnion) – and only if you stay within your credit limit and pay your bills on time. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
Card issuers carry lines of credit cards that cater to higher risk markets, and not all card issuers accept co-signers. Go through the terms of each card to make sure that you are applying for the correct card with that issuer.
You certainly can get a credit card without a job, but be careful not to abuse the privilege. Keep your credit purchases to an amount that you can pay off at the end of the month to avoid interest charges, and take into account any fluctuations in your existing income that could change your monthly spending limitations. Without a job, it’s easy to let spending on an unsecured credit card drag you into a debt spiral that you can’t escape, even when you do get a job in the future.
If you want more credit, check out our list of credit card offers.