How to Build Credit While Unemployed

Whether you’re newly unemployed or have been without a job for quite some time, you might be concerned about building and maintining your credit score. Being unemployed can be stressful, but did you know you can actually build your credit when you’re without a job?

In this article, we’ll show you how to build credit while unemployed.

How to build credit while unemployed

These strategies may help you boost your credit score even without a job:

Become an authorized user

Do you have a trusted family member who has good credit? If so, consider asking them if they’ll add you as an authorized user on their credit card. When you’re an authorized user, the payment history for the account appears on your credit report, too. If the account owner makes payments as agreed, being an authorized user can boost your score.

Open a secured credit card

If you have no income, you might not be able to qualify for a credit card. However, if you can access your spouse’s income or have other assets, a lender may still approve you.

In some cases, you might only be approved for a secured credit card. With a secured credit card, you make a refundable deposit in the amount of your credit line. You make purchases and pay them off just like with a regular credit card, and the lender uses your deposit to cover any payments you can’t or won’t make.

If you make all payments on time and in full, you might be able to upgrade your account to an unsecured one (and get your deposit back).

Try a credit-builder app

Credit-builder loans, secured credit cards, and other tools for building credit are available from brick-and-mortar banks and online companies alike. In many cases, credit builder apps and other online companies have less stringent approval requirements.

If you’ve been turned down by other lenders because you’re unemployed, it’s worth trying to work with a credit-builder app like Kikoff. Here’s how it works:

• We don’t check your credit before approving you
• If you’re approved, we extend a small credit line to you
• You can use that credit line to buy things in the Kikoff store
• You pay off your purchase (with no interest) over time
• We report your payments to credit bureaus

We also offer other debt management tools, including debt negotiation, rent reporting, credit-builder loans, and secured credit cards.

Use tools to report your bill payments

Some financial tools and apps may help boost your credit by reporting your rent and bill payments to credit bureaus. If you’re still paying bills (from savings, investment income, etc.) while unemployed, these payments may help you continue to build a positive credit history.

How credit works without traditional income

Many people don’t realize that while the credit system deals with money, your income is not a factor in determining your score. It’s possible to be a high earner with a low credit score, and it’s also possible to have an excellent credit score with little to no income.

However, if you’re unemployed, it may be difficult to get approved for new credit. Lenders typically look at your income to verify that you can repay a debt. If you’re unemployed, they might be able to look at the following when trying to decide whether to approve you:

• Your current bank balances
• Retirement income
• Investment income
• Equity in your home or other assets
• Your spouse’s income

If you don’t have a reliable income, some lenders may require you to make larger down payments (if applicable) or have higher credit scores to be approved.

Can you build credit without a job?

Often, advice for improving your credit involves paying down debts. If you have existing debt, it may be difficult to make a significant dent in it while unemployed. However, if you’re hoping to learn how to build credit while unemployed, there are plenty of doable options.

Common mistakes to avoid

If you’re wondering how to build credit while unemployed, it’s important to have a plan. However, you should also be aware of some common mistakes:

Failing to make minimum payments

Broadly speaking, it’s best to make more than the minimum payment on your credit cards. If you’re unemployed, you may not be able to do that, but you should at least make the minimum payment. When you start working and have a steady income again, you can start paying more each month.

Maxing out your credit cards

When you have little income or no income, you may need to rely on your credit cards a little more than usual. However, if at all possible, you should keep your credit utilization to 30% or less. Using more than that can lower your credit score significantly.

Not contacting creditors if you can’t pay bills

Many people who are unemployed have trouble paying their bills at some point. If you think you may be unable to pay your debts, get in touch with your creditors as soon as possible. Many lenders have hardship programs that will temporarily pause payments while you get back on your feet.

When asking to pause payments or otherwise modify your repayment plan, you should always get in touch with your creditors sooner rather than later. Creditors are generally more willing to work with debtors who are proactive.

Conclusion

If you’re unemployed, it’s easy to feel like your financial life is on pause. However, there are still steps you can take to build your credit.

‍Kikoff makes establishing a positive payment history easy, and you can open an account in a few clicks. Let us help you kick off your credit-building journey today!