Your credit history and score are important. They enable you to borrow money and make large purchases.
In most cases, people get paychecks from work and make their monthly payments on time.
But what if you don’t have a job or an employment history? Is it still possible to maintain or build your credit without working?
Credit History and Reports
Your credit history is your own. That means that even if you have a partner or spouse, your credit score will remain independent from theirs.
It’s possible to cosign on big purchases like a house or car. In these cases, the bank will consider both of your credit histories together and give you a loan.
But your individual credit score will remain unchanged simply by getting married.
This is important because if you’re a stay-at-home parent or otherwise aren’t working, your credit score still lives independently of your spouse. If you want to make a purchase on your own or apply for a line of credit, you may have trouble if your credit score isn’t good.
Income vs Employment
Many loans or lines of credit rely on knowing that you can pay it back. But it’s important we make a distinction between income and employment.
Most of us make our living by getting a paycheck from an employer. This is different from earning an income though.
You may be married and share a bank account. Here, your income is considered “joint.”
Similarly, you may be retired. In which case, you’re entitled to Social Security benefits. These monthly payments arrive in your bank account as income.
So while you may not currently have a job, it’s possible to still earn an income. This is important for what creditors consider in your application. They want to know that you will have the ability to pay back a loan.
Even if your last dates of employment are well in the past, showing regular deposits to your bank account can still allow you to apply for credit lines.
Building your credit score without a job will be difficult to do quickly. You won’t be able to buy something big like a car or house without being able to prove you have a job. It’s too big of a risk for lenders to take.
You’ll have to focus on smaller lines of credit like credit cards or taking out a utility bill or phone in your name.
Getting a credit card is one of the easiest lines of credit you can get. You don’t have to have a job to get a credit card, but you will need to prove income on credit card applications.
Typically, this is your work history. But without a job you’ll have to rely on other ways to prove your ability to pay.
If you have a bank account, you can show that your spouse earns income. Or you can show a large reserve of cash in a savings account.
There are also secured credit cards. A card issuer may need you to put down a deposit for the card. They will then offer you a small credit line. The deposit can get used to pay your bill if you’re unable to.
An extra benefit of some secured cards is that they may turn into a full credit card after a number of successful payments. Your current bank likely offers secured credit cards.
Neither a credit card or secured card will revamp your credit score overnight. But they can be a powerful tool to get started building your credit without a job.
You may ask if you can become an authorized user of your spouse or partner’s credit card. Authorized users don’t always receive the same boosts to their score as having a card on your own.
It’s possible to see a small bump to your FICO score up front for being an authorized user, but the effects are limited.
Nearly a third of your credit score comes from credit utilization. The major credit bureaus track how much of your line of credit you decide to use. That means if you spend $1,000 in a month on a card that has a $10,000 limit, your credit utilization is 10%.
Credit utilization is something creditors worry about because they want to know how often you use your credit card and for what.
If you’re trying to build up your credit score, keeping your utilization low is important. Use your card to make small purchases and pay it off every month.
If your credit utilization rate goes up, it can have negative effects on your score.
Focus on Your Entire Score
Your credit score isn’t just an indicator of how much money you can borrow comfortably.
It’s composed of things like how long you’ve had a line of credit, payment history, your other credit lines, how much you owe, and more. This, along with your credit report, which contains your personal information, is given to lenders before they lend money.
If you’re able to start building your credit without a steady job, make sure your score is on track.
Don’t just focus on lines of credit, but instead your other habits. Pay your bills on time and in full.
Over time, you’ll start to notice growth and changes to your credit report, which you can request a free copy of it once per year.