Can You Qualify for a Credit Card While Unemployed?

According to the most recent economic statistics from the US Labor Department, approximately 36 million Americans have filed for unemployment benefits during the past two months. Perhaps you are among them. Your emergency fund is used up and you have no idea when you will go back to work. At times like this you might pull out your credit card. But maybe you do not have credit cards. Can you qualify for a credit card while unemployed?

Credit Cards Impact Your Credit Score

A credit card should always be a last resort, but there are times, such as the current one, when a credit card can help you cover unplanned expenses.

You should use a credit card sparingly. The interest and fees that you incur add to your original debt. If you are unable to pay the balance in full, you lengthen the time it takes to pay off your original purchase. If you are late with payments, you will hurt your credit score.

However, with the lingering uncertainty due to the COVID-19 pandemic, you may be finding it increasingly difficult to make ends meet. A credit card could be your only option to cover critical expenses. But is it possible to qualify for a credit card while unemployed?

Determining Your Credit Risk

Credit card companies want to know that you are a good risk. When you apply for a credit card, issuers will ask you for basic information, such as your name, address, and income. They also check your credit report.

A good credit score and a history of keeping your accounts in good standing helps you qualify for a credit card at the best terms.

Another factor weighed by credit card issuers is your income-to-debt ratio. This gives them an indication of your ability to make the monthly payments. Your income-to-debt ratio is also used to set your credit card limit.

If you are unemployed, what is your income-to-debt ratio going to look like?

What is Income?

Fortunately, your paycheck is not the only source of income considered by credit card companies. In fact, any source of money that you are consistently receiving is defined as income, including unemployment benefits. Other sources of income that can help you qualify include:

  • Spousal or child support
  • Investment returns
  • Rental property income
  • Inheritance
  • Social security payments

Therefore, it is possible to qualify for a credit card while unemployed.

If you do not have any of these consistent streams of money, you might still qualify for a credit card. You can use some of the same strategies that you would use to establish a credit history for the first time, or when your credit score is not so great.

How to Qualify for a Credit Card While Unemployed

Authorized User

Becoming an authorized user on another person’s credit card account is one way to access the funds you need to meet your monthly obligations. At the same time, you also have an opportunity to build up your credit score. You want to be sure the primary holder pays the monthly balance on time. Your credit score will be negatively impacted by the primary holder’s late or missed payments.

Secured Credit Card

Secured credit cards require a deposit in advance. This makes it much easier for the issuer to give you credit. Since your credit limit is based on the deposit that you make, your total income is less important. Secured credit cards can have high fees though, so you want to shop around and carefully read all the terms on your contract.

Co-Signer

With a co-signer, you are the primary card holder, but you use your co-signer’s good credit report and income to qualify. You are solely responsible for making the payments, but if you are late or default, your co-signer’s credit score is also negatively impacted.

Bottom Line

Yes, you can qualify for a credit card while unemployed.

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