Prior to October 1, 2011, individuals were able to apply for credit cards using their household income. However, this is no longer the case. When you apply for a card now, credit card companies consider your income on the individual level in order to match the way they evaluate debts. If you are a stay-at-home parent, it’s understandable if you’re concerned about your ability to build credit under your own name. After all, homemakers generally aren’t compensated monetarily for all that they do, but that shouldn’t mean they aren’t allowed to get credit cards…should it?
No. Luckily, this is neither what the rule regarding individual income was intended to bring about, nor its ultimate effect. The thinking behind the rule was that an apples-to-apples means of evaluating an applicant’s ability to pay his or her own credit card bills was needed in order to lower the charge-off rate and help prevent people from getting in over their heads, as was the case for many of us during the Great Recession. This individual-income system corrects previous problems, such as severely indebted households getting approved for additional credit by pooling their income and hiding their collective debts and liabilities by having the person with the smallest debt load apply.
Now that we have provided the rationale behind the law, let’s address the ways in which stay-at-home parents without individual incomes can obtain credit and maintain a solid credit history under this new system.
First, there’s secured credit cards, which basically offer guaranteed approval, as long as you have sufficient assets to make the monthly minimum payments of around $15 per month. The nice thing about secured credit cards is that they are indistinguishable from unsecured cards on your credit report, and you can add to your deposit over time all the way up to $5,000.
Secondly, and perhaps more importantly, joint credit card applications may also be available. Not all issuers offer this type of application, but if you find one that does, you and your spouse can list your combined income/assets and debts/liabilities in order to obtain a credit card in both of your names. Both of your credit reports will reflect usage of this card and both of you will be held responsible by law for any outstanding payments.
Last but not least, let’s not forget that being an authorized user on a spouse’s account will provide some credit score gains. They won’t be as pronounced as if the card was in your own name, but something is certainly better than nothing.
There you have it. Yes, it is fair to say that the new rules have restricted the credit options available to stay-at-home parents. However, they have also created a much more logical underwriting environment, while at the same time preserving stay-at-home parents’ access to credit cards. This will enable you to maintain a solid credit score and thereby qualify for a loan, rent property, etc., if, heaven forbid, something happens to your spouse.