How to Start Building Credit as an Adult with a Disability

Zeke Carrington | Posted on August 9, 2024 |

Building and maintaining good credit is essential for many aspects of life. For adults with disabilities, it might seem like a challenging task, but it’s definitely achievable. In this blog, we will explore how being on disability affects your credit and provide practical steps on how to build and maintain your credit.

The Importance of Credit

Credit is crucial because it impacts many areas of life:

Loan Approvals: Good credit can help you get approved for loans with better interest rates. This is vital for purchasing a home, car, or even consolidating debt.
Interest Rates: Higher credit scores often mean lower interest rates on credit cards and loans. Lower interest rates save you money in the long run, making it easier to manage your finances.
Employment: Some employers check credit scores as part of their hiring process, especially for jobs that involve handling money or sensitive information. A good credit score can enhance your job prospects.
Housing: Landlords may review credit scores to determine your reliability as a tenant. A good credit score can make it easier to find a place to live and may even lower your rental deposits.
Insurance: Insurance companies might use credit scores to set premiums. A higher credit score can sometimes result in lower insurance rates, reducing your monthly expenses.

Can People with Disabilities Build Their Credit?

Absolutely. Even if you rely on Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), you can still build your credit. The key is to understand the basics and take actionable steps. Here’s how being on disability affects your credit:

Consistent Income: Although SSDI or SSI provides a steady income, it might be lower than a traditional salary, which can affect your ability to qualify for certain credit products. However, this income is reliable and can be used to build a credit history.
Credit History: A lack of credit history can make it harder to get approved for loans or credit cards, but there are options specifically designed for building credit. Understanding how to start building credit can open doors to financial stability.
Special Considerations: Some credit products and financial services may be more accessible or specifically tailored for individuals with disabilities. Researching and understanding these options can help in choosing the right credit-building tools.

How to Build Credit as a Person with a Disability

Building credit involves strategic steps and knowing your resources. Here’s a step-by-step guide:

Learn about Financial Resources for the Disabled

Start by exploring financial resources available to people with disabilities:

National Disability Institute: This organization offers financial education tailored to individuals with disabilities, helping you understand how to manage your finances effectively.
Social Security Administration: They provide comprehensive information on how SSDI and SSI affect your financial life, including budgeting tips and financial planning resources.
Community Resources: Local non-profits and community organizations often offer financial counseling and resources specifically for individuals with disabilities.

Focus on Credit Scores

Understanding your credit score is the first step. Here are some key points:

Payment History: This is the most significant factor in your credit score, so make sure to pay all your bills on time. Late payments can severely damage your credit score.
Credit Utilization: Keep your credit card balances low compared to your credit limits. Aim to use no more than 30% of your available credit to maintain a healthy credit score.
Credit Mix: Having a variety of credit types (like credit cards and loans) can boost your score. Consider having a mix of installment loans (like a car loan) and revolving credit (like a credit card).
New Credit: Be cautious with how often you apply for new credit. Each application can cause a small drop in your credit score.
Monitoring: Regularly check your credit score and report for accuracy. Many services offer free access to your credit score and can alert you to any changes.

Consider a Secured Credit Card

Secured credit cards are a great option for those starting out or rebuilding credit:

How It Works: You provide a cash deposit that becomes your credit limit. For example, if you deposit $500, your credit limit is $500. This reduces the risk for the lender.
Benefits: These cards are easier to obtain and help establish a positive payment history. Make sure to use the card responsibly and pay your bill on time each month.
Options: Look for secured credit cards specifically designed for people with limited credit history. Many banks and credit unions offer secured cards with low fees and reasonable interest rates.

Apply for a Credit-Builder Loan

Credit-builder loans are designed to help individuals build credit:

How It Works: You make regular payments, and the money is saved in a secured account. Once you pay off the loan, you receive the money. For example, you might take out a $500 loan, make monthly payments, and get the $500 back after the loan is paid off.
Benefits: Regular payments are reported to credit bureaus, helping to establish a good credit history. This type of loan is a practical way to demonstrate your ability to manage credit responsibly.
Availability: Many credit unions and community banks offer credit-builder loans. Some online lenders also provide these loans, making them accessible even if you don’t have a traditional bank account.

Report Inappropriate Behavior

If you encounter any issues or unfair practices, take action:

Dispute Errors: Regularly check your credit report for errors and dispute any inaccuracies. You can get a free credit report from each of the three major credit bureaus once a year at AnnualCreditReport.com.
File Complaints: Report any inappropriate behavior by creditors to the Consumer Financial Protection Bureau (CFPB). They can investigate complaints and take action against companies that violate consumer rights.
Seek Assistance: Legal aid organizations and advocacy groups for individuals with disabilities can provide support and guidance if you face discrimination or unfair treatment in credit-related matters.

Understand Legal Rights

Knowing your legal rights can protect you:

Equal Credit Opportunity Act: This law prohibits discrimination in credit transactions based on disability. Creditors cannot deny you credit or charge you higher rates solely because you have a disability.
Fair Credit Reporting Act: This law ensures the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. It gives you the right to dispute inaccurate information and have it corrected.
Americans with Disabilities Act: This law provides additional protections against discrimination for individuals with disabilities, ensuring equal access to financial services.

Start Building Your Credit with Confidence

Building credit as an adult with a disability is possible with the right approach. Focus on learning about financial resources from organizations like the National Disability Institute and the Social Security Administration. Monitor and improve your credit score by keeping track of payment history, credit utilization, and credit mix. Explore secured credit cards and credit-builder loans as tools for establishing credit.

Protect yourself by disputing errors and understanding your legal rights. With patience and persistence, you can achieve a good credit score and open doors to better financial opportunities. Whether you’re asking, “Can I get a credit card on disability?” or “Can someone on disability have a credit card?”—the answer is yes, and these steps will guide you on your journey.