Editorial Policy

Can people on Section 8 and SNAP get a card?

Erica Sandberg

April 7, 2015

QHi Erica,

Do credit card companies discriminate against people on Section 8 and SNAP? I want a credit card for life bills. I get $234 in child support. My Honda Civic is paid off and is worth $2,000, if that would help me get a card. Before I hit hard times, I had a card. Thank you. –Brenda


Dear Brenda,

Try not to worry so much about the source of your income, as it's really the stability and amount that counts. Credit card issuers do not check to see if you receive government assistance or any kind of charitable donations when determining eligibility. It would be discrimination to deny you simply because you receive welfare. Nor do they inquire about your vehicle or require it to be held as collateral. While some cards are secured, they are guaranteed by cash held in a deposit account rather than property.Ask Erica

What can (and do) issuers review before making a lending decision? First and foremost — your credit rating. Though what you bring in as income is a factor — and I'll get to the details of that in a moment — most of the decision depends on your debt and borrowing behavior. Since the past is predictive of the future, what you've done with money before today is relevant.

Therefore, after you apply, credit issuers will check your consumer credit reports — or more often, just your credit scores. The FICO scoring model (and other such scores) turns the information appearing on these credit reports into assessment numbers. With it, issuers can assess their level of risk in taking you on as a customer. FICO scores begin at 300, indicating very high risk, and go up to 850, indicating very low risk.

Even though you've experienced some financial difficulties, you still may be eligible for a credit card. There is a card for just about any kind of credit rating, from bad to excellent.  You want to apply for only cards within your range, though as multiple applications can bring down your score.

Pull your credit reports now. There are three major credit reporting agencies in the United States — TransUnion, Equifax and Experian — and you can get them all for free once per year from AnnualCreditReport.com. FICO scores are about $20 per report from MyFICO.com. However, you likely only need to pull one credit report and one score — that should give you a decent idea of where you stand.

Read over your credit report carefully. Positive credit activity will remain on a credit report for 10 years. If you had credit accounts or loans that you always paid on time and satisfied completely, they are working in your favor. On the other hand, if you paid late, defaulted on accounts, debts went into collections or you were sued for a balance, they will be listed. Most negative data remains for seven years, though Chapter 7 bankruptcies are recorded for 10, and child support arrearage and defaulted student loans can be listed until cleared.

Also check the credit report for inaccuracies, such as incorrect addresses, accounts you don't recognize, and dispute any you find.

Now, compare your scores to your reports. FICO ranks payment history and debt-to-credit limit as the most crucial scoring considerations. If you see that you have a long and consistent history of paying on time while also keeping the debt well below your charging limits, your scores should look pretty good.

Back to income: Again, it's about risk. Issuers want to be as sure as possible that you have the means to repay what you're able to borrow with the card. Think of it this way: With a credit card, the issuer will lend you a fixed sum each month. If the limit is $1,000, the card company wants to be sure that you have enough cash flow to make the payments easily. That income can be from a job as well as other sources. If you are married or have a partner, you can include your spouse's salary as part of your household income. You can also include alimony, child support and what you receive in aid.

That's why low-income housing and food stamps are irrelevant. Where the money comes from isn't nearly as important as what you do with it.

Got a question for Erica? Send her an email.