August 17th, 2011
5 Credit Tips for Stay-at-Home Parents
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**It’s Parenting Week here on the Credit Karma blog! Each day we’ll bring you a post all about tips and tricks for parents and kids alike.**
Listen up, stay-at-home parents. If you’re not making a paycheck, you might have a hard time getting approved for a credit card in just a couple of months.
Although enacted in 2009 to restrict the ways in which credit card companies issue cards and charge card members, the CARD Act seems to have inadvertently targeted stay-at-home parents. Pending clarifications on the CARD Act will require credit card issuers to assess an applicant’s ability to repay debt based on individual income or salary, rather than household income.
This means that stay-at-home parents with no individual income will have a hard time getting approved for a credit card come Oct. 1.
Before this new amendment is enacted, what can stay-at-home parents do to build their credit? We’ve gathered a few credit tips to help you start building and maintaining your credit health.
Maintain your installment debt repayment. If you have a mortgage, student loan, car or other personal loan, you’re already building your credit. Installment loans, when paid consistently and on time, are great ways to steadily build credit; although keep in mind that it’s never a good idea to take out a loan just to build credit. If you haven’t done so already, set up automatic payments to make certain you don’t miss a payment.
Get a secured credit card. If you can’t get approved for an unsecured credit card but want to start building your credit now, get a secured card. The main difference between a secured and unsecured card is that secured credit cards require a security deposit that sets your credit limit. If you make a late payment, your security deposit acts as a safety net. With consistent on-time payments and an active, revolving balance, you’ll build the credit you need to apply for an unsecured credit card.
If you have one, use your credit card. An inactive credit card won’t do your credit score any good. In order to continue building your credit, show current activity on your credit card. Use your credit card for small purchases every month, like gas or a quick grocery run. Just make sure you pay off your balance in full and on time each month. And keep in mind that, in order for a credit card to work toward building your credit, it must be in your name, not your spouse’s.
Request a credit card limit increase. One way to increase your available credit without applying for another credit card is to request a credit limit increase. For now, when the card issuer checks your credit, you’ll only have to provide household income when requesting a credit line increase. Call customer service for your card issuer and ask for a credit limit increase. Just make sure you find out whether or not it will cause a hard inquiry on your credit report before you make the request.
Check your credit report for errors. If you haven’t requested a copy of your credit report, do so through AnnualCreditReport.com, where you can get one from each of the three credit bureaus free once a year. Your credit report is long and rich in data and—quite frankly—a little daunting to read. But take the time to go through each report to check for errors such as misreported credit card limits, old debt and hard inquiries you might not have been aware of. Typically, you don’t need to go to a credit repair service for help; If you find an error, dispute it with the credit bureau.
Bottom Line: The credit moves you choose to make as a stay-at-home parent are, of course, up to you. But if there’s the chance you’ll need to apply for a credit card after Oct. 1, it’s a good idea to take a look at your credit situation now to find out how you could be affected by the new CARD Act amendments.