For people with disabilities, credit is the key to a crisis
FEver since Erin Noon Kay was little, her mother taught her how to manage her money. It’s a good thing for all parents to do, but for Noon Kay, it was essential. She was born with cerebral palsy. And in addition to general budgeting, she needed to know how to navigate the confusing system of government benefits.
Noon Kay – who founded Claiming Disability, a company that advocates for people with disabilities through advocacy and media representation – explained that many people with disabilities do not manage their own finances. Instead, their finances will be handled by a non-profit organization or their parents, which means they don’t learn the skills themselves.
“I don’t think we’re doing people with disabilities a favor when we try to host [them] the reality of their own lives,” says Noon Kay, 33. “As if my mother had sheltered me from all these realities, it would have been a huge shock.
An often overlooked area of financial management is credit. Having good credit (FICO scores of at least 690) means having access to options in case of an emergency – if, for example, you lose your job or are unable to work.
But people with disabilities are already less likely to work full time and tend to earn less on average than people without disabilities, says Tom Foley, executive director of the National Disability Institute, or NDI. And he assumes that the disability community is one of the most invisible-credit groups, making emergencies more difficult to manage.
For some, going into debt is the only option
After all, the solution isn’t always as simple as spending less money: if you have a disability, certain expenses often seen as luxuries are absolute necessities.
Foley gave the example of someone’s air conditioning breaking down in the middle of summer. If you have a disability and live in Georgia, getting it fixed is not a luxury; it’s probably necessary for survival. Unfortunately, if you also have poor credit (FICO scores of 629 or lower), your options for covering these expenses are limited.
“It’s all of these things that conspire to put someone in a really vulnerable economic position, which makes it much more difficult to manage any debt,” Foley says.
A 2017 NDI analysis of survey data from the Financial Industry Regulatory Authority, or FINRA, found that people with disabilities are much less likely to use credit cards than the general population and are much more likely to struggle with credit cards. debts and to use “alternative credit services”. like pawnshops and payday loans. Payday loans can have an APR greater than 300%.
If you have bad credit or no credit at all, there is alternatives to payday loans it will be easier to repay. But those with good credit still have better options, including low-interest loans and 0% introductory APR credit cards.
How to start building your credit
Building your credit can be a challenge if you are struggling financially. But it is not impossible. Most of the time, it’s about learning how to manage any debt you take on. In fact, Noon Kay credits her mother’s financial lessons for the good credit she has today.
Here’s how you can start:
Open an account that is reported to the credit bureaus
Most credit reporting models do not track rent or utility payments, but credit cards and loans are generally reported to the three major credit bureaus. Getting a credit card is one of the easiest ways to make sure your account will actually help your credit, and there are options for those with weak or thin credit. (More on that below.)
Make payments on time
Once you have an account reported to the credit bureaus, make every payment on time, as this is one of the most important factors in your credit scores. If you have a credit card, you don’t even have to pay your entire balance. As long as you pay your minimum payment, you will be able to protect your credit.
But remember: just paying your minimum balance isn’t a great long-term solution. Interest on credit cards will likely be much lower than on a payday loan, but the APR will generally remain in the double digits.
If you’re having trouble paying your minimum payment, be proactive and contact your credit card issuer first. The transmitter may have a difficulty program to help you lower your monthly payments and keep your account in good standing.
Credit cards that can help you
If your credit isn’t ideal, you may have trouble getting approved for many credit cards, including most rewards cards. But you still have a few options:
Secured credit cards
Unlike other credit cards, secure cards require a cash deposit in advance. Once you close the account in good standing – or are able to upgrade it to an unsecured traditional card through responsible use over time – you will be able to get that deposit back. Major issuers like Capital One and Discover offer secured credit cards.
Since filing reduces card issuer risk, it is easier for applicants with low or no credit to be approved. In fact, it’s possible to find secure cards that don’t require any credit checks or even a bank account, although these products may have other downsides, such as annual fees or no upgrade path to higher level cards.
“Alternative” credit cards
Depending on your credit scores, you may qualify for an alternative unsecured credit card that may use non-traditional underwriting standards to make approval decisions. These cards may still consider your credit history, but they will also consider other factors like income, employment, and banking information.
It won’t be the best option for everyone. If you have a limited or fixed income, you may find it difficult to get approved. But it’s an option to consider if your credit history is weaker than the rest of your financial history.
Become an authorized user
You can also build credit by becoming an authorized user on someone else’s credit card account. You might want to ask someone who has good financial habits and makes every payment on time, since you’re building your credit by building on theirs.
As an authorized user, you can obtain your own physical card and make purchases with it, although this is not required; your credit could see a benefit without you having to use the card.
But authorized users usually don’t have the ability to make changes to the account, or make payments on it. This is the responsibility of the primary account holder, which means it’s wise that you set the rules and expectations up front. If you accrue charges that the primary account holder cannot reimburse, each of you may experience negative impacts on your credit.
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