Can I Get a Credit Card If I’m Unemployed? Should I?

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Credit cards are terrible and wonderful things wrapped up in the same shiny piece of plastic.

The right credit card can whisk you off on a dream vacation with reward points.  The wrong card can catch you with a late payment and jack your interest rate up to 20%.

A common question about credit cards revolves around getting one if you are unemployed.

Is it even possible to complete a credit card application when you’re unemployed and be accepted?  And even if it is possible, is this the wisest financial move you can make?

Let’s look at some scenarios to dig deeper on this problem.

Can I Get a New Credit Card When Unemployed?


The answer to this question is based on two different items: what credit card companies look for in a credit application and the type of unemployment situation you are in.

What Credit Card Companies Look For in Credit Applications

Before you can determine whether or not you can get a credit card while unemployed, you need to understand what the credit card companies are looking for in an application.

They aren’t asking for all of your personal information just for giggles; everything you input on the application is used to get a better picture of who you are as a potential customer.  That’s a huge reason why any creditor does a credit score check; they are assessing risk of loss.  If you are a high risk customer that is unlikely to pay them back you end up getting denied.

Part of that application includes a section for your income.  If you have no income then you have no way to pay the credit card company back.  The odds of getting approved in that kind of a situation is slim to none.

However, you might have unemployment income or other sources of income despite not working.  Those items can increase your odds of getting an approval.

Related: Can’t Get a Regular Credit Card? Look Into a Secured Card.

Two Types of Unemployment

unemployed_need_workThere are two different types of unemployment: the kind where you are the only income producer and you have no other incomes from investments, and the kind where you have other sources of income.

The type of unemployment is key in determining whether or not you can now get a credit card despite being unemployed.

Unemployed and No Other Income Sources

If you are single, unemployed, and don’t have a trust fund paying you tons of earned interest each month then you essentially have no income.  Your unemployment income counts as income, but is so small that you probably can’t pay all of your bills off of it.  (You technically might be able to get a credit card using this income on your application, but it isn’t likely because the amount is so low.)

Unemployed With Other Income Sources

On the other hand, there are several different ways you can technically be unemployed but still earning an income.

You might be a business owner who doesn’t work day to day in the business anymore, but sits back and enjoys the profits.  Perhaps you inherited a pile of cash and are living off of the interest income.

All of these amounts can be used to fill in the income section of a credit card application, so while technically being unemployed you can still get approved.

One key area that just recently changed in regards to being unemployed: stay at home spouses.

In the past the credit card companies would only allow you to put your individual income on the credit application.  So if you make $40,000 per year but your spouse is a doctor and earns $175,000 per year (which greatly increases the odds of repayment of the debt), you could only rely on your $40,000 income on the credit application.  That might limit your ability to get the best cards available or to carry multiple cards.

Likewise if you stay at home with the kids or just as a homemaker, you don’t earn an “income” despite you having one of the hardest jobs in the world.  Your spouse earns all of the income, but based on previous credit card application rules you wouldn’t qualify for a card since you didn’t have an income of your own.

The Consumer Financial Protection Bureau announced in October 2012 that they would be changing this rule so that a spouse with “reasonable expectation of access to [the family's] income” can now qualify for a credit card using that income.

Should You Get a Credit Card When Unemployed?

It all comes down to your income situation.

If you are trying to make ends meet on unemployment and have no other sources of income, you are likely to be denied for the credit card.  You will also have a new inquiry on your credit report; too many of those and your score will go down which can cause other financial difficulties.

However, if you are “unemployed” because you stay at home to care for the kids then there is now no risk in sharing in the income of your partner.  Getting a credit card will still be based on your combined incomes so the higher the better, but you can tap that income on your application.

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Published or updated July 17, 2013.

Comments

  1. Reading this, one would get the impression that the odds are stacked against the unemployed. However, I think you do point out some glimmers of hope, it boils down to doing some research to determine credit card companies that would issue a card given a particular unemployment/financial situation. Very informative and helpful article Kevin, thanks for sharing!

  2. As long as credit cards are used responsibly, there is no reason not to get one or use one. The key here is not spending more than you can afford whether employed or unemployed. I’ve always had them and used them when needed, however, I was always aware of what I was spending and what the bill would be. Also, using one with rebate points can help pay the bill down or the points can be used when purchasing.

    • Glen Craig says:

      Agreed, but the hard thing is actually knowing if you can use a card responsibly. I think there are plenty of people out there that can use credit wisely but I think we know there are many out there that can’t. It’s a tricky situation and you really have to know yourself before you apply for a card if you’re out of work.

  3. Preapproved credit card offers are not as common as in the past, but many people still get offers on a regular basis. In most cases the banks and credit bureaus have no data about your employment status. They simply consider your current spending and payment behaviors.

    If you get a preapproved offer you may not need to verify income. The only qualifier is that your credit did not deteriorate between the time the prescreen was run, and your acceptance was received by the bank.

    Of course, if I were unemployed I would not open any new lines of credit.

  4. As much as I love my credit card and the rewards that it affords me, I’m not so sure it’s a great idea to get one if you are unemployed. Maybe if you are unemployed with other income, as you mentioned.

What Do You Think?

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