You don’t always need a job to qualify for a credit card, but you generally must be able to show that you have income. Your ability to make payments is tied directly to your income, so income is a key factor in whether you get approved for a card and, if so, what your credit limit will be.
Income sources that card issuers consider
It certainly helps to have a paycheck to point to when you apply for a credit card. But in the absence of wages or a salary, credit card issuers consider other income sources.
If you’re at least 21, federal law lets you list income from your spouse, partner or other household members on a credit card application, so long as you have access to that income. If you’re under 21, however, credit card issuers must look at your individual income or assets.
Other acceptable sources of income can include:
- Investment returns
- Social Security or pension income
- Retirement fund distributions
- Inheritance or trust fund distributions
- Unemployment benefits
- Alimony, child support or separate maintenance income, if you will use it to pay your bill
- Liquid assets such as a savings account
How income affects a card application
Even if you have plenty of income, approval for a credit card isn’t guaranteed. Income is just one factor that issuers look at when considering your application. Your credit history and credit score come into play, too, as does your debt-to-income ratio.
A debt-to-income ratio shows how much of your income is already being eaten up by debt payments. You calculate it by dividing your monthly debt payments by your gross (pretax) monthly income. Lenders are required by law to consider your ability to pay when you apply for a credit card. That’s why card issuers might ask not only about your income but also about obligations like rent, car payments, alimony or other debts.
Issuers usually have a full view of your credit profile. Although your income doesn’t appear on your credit report and isn’t a factor in your credit score, card issuers can look into your income through services provided by the three credit reporting bureaus: Equifax, TransUnion and Experian. These services use income modeling to estimate income based on available information. Issuers may also ask for your permission to check your tax returns to verify income.
Getting a credit card with little or no income
If you don’t have enough income to qualify for a credit card on your own, you still have options.
Seek out a co-signer: Ask a friend or family member with a good credit score to co-sign your application. A co-signer accepts legal responsibility for making the payments on your account if you fail to do so. Most major card issuers no longer accept co-signers, although many smaller ones do.
Become an authorized user: When you’re an authorized user on someone else’s account, you get a card with your name on it, but the account owner is responsible for the payments. You can work out an agreement with them to pay back any charges.
Save up for a secured credit card: Secured credit cards require an upfront security deposit, usually equal to the credit limit. The deposit protects the issuer if you fail to make your payments. You get the deposit back when you close or upgrade the account. Secured cards are for people looking to build or rebuild credit, so income requirements tend to be more relaxed.
It may be easier to get a credit card if you have a job than if you don’t, but a good income from another reliable source can go a long way toward making up the difference.