Can I get a credit card without a job?

Credit cards are important for financial independence and flexibility. A credit card makes it convenient for everyday purchases, paying bills, and building your credit score for future financing opportunities. However, a common question among individuals who are unemployed or without a steady source of income is whether they can qualify for a credit card.

Some credit card companies have stringent requirements to qualify for specific cards, such as income, credit score, and age. If you're worried about applying for a credit card when unemployed, the short answer is yes, it's possible to get a credit card with no job. However, the process and eligibility criteria may vary depending on your situation and the credit card company's policies.

How does a credit card work?

A credit card allows cardholders to borrow money up to their credit limits for purchases. You can use the credit card anywhere within the card's network. Exceeding your credit limit may result in your credit card being declined or overdraft fees.

Credit card transactions are billed at the end of the card's cycle, typically around 30 days. At the end of the billing cycle, you receive a statement with the purchases and payments you've made, the minimum payment due, and the payment deadline. If you carry a balance, like missing a credit card payment, the issuer assesses the interest charges on the remaining balance.

Credit card interest is calculated using the outstanding balance, the annual percentage rate (APR), and the period for which interest is calculated. The APR represents the cost of borrowing, which can be fixed or variable. If you pay your credit card balance in full by the due date, you can avoid interest charges.

Does unemployment affect your credit profile?

Unemployment may affect your credit profile. When you apply for a credit card, credit card companies typically assess your ability to repay your credit card account based on your income.

If you're unemployed, you may not have a steady income stream to demonstrate the ability to make timely payments and manage your debt. It can make it more challenging to qualify for certain types of credit cards, especially those with stricter income requirements, like unsecured credit cards.

Some people rely on credit more when they don't have a steady source of income because they can worry about paying off the balance later. It can lead to higher credit card balances and increased credit utilization ratios, which lowers your credit score. Maxing out your credit limit can also be viewed unfavourably by credit scoring models.

If unemployment leads to prolonged financial hardship or default on credit accounts, it can have long-term consequences on your credit history. Negative information, such as accounts in collections, can stay on your credit report for several years and significantly impact your ability to obtain credit in the future.

How do credit card companies check your income?

Credit card companies use various methods to verify your income and ensure you have the means to repay debts.

Employment verification

Many credit card issuers verify income by contacting applicants' employers to confirm their employment status, job title, and income level. While it provides accurate income information from employment income, it may not capture additional sources of income that you receive.

Bank statements

Credit card companies may request recent bank statements to verify income. Bank statements can show regular deposits from employment and other sources of income, such as investments and rental payments. Reviewing bank statements allows issuers to assess applicants' overall financial health and ability to manage credit responsibly.

Pay stubs and tax returns

Some issuers request copies of your pay stubs or tax returns as part of the application process. These documents provide evidence of the applicant's income and can be more accurate than self-reported income. However, not all credit companies require this level of documentation, especially if you have a strong credit history.

Credit bureau data

Credit card companies may use credit bureau data to estimate an applicant's income. Credit reports contain information about your credit accounts, including credit limits, balances, and payment history. Companies may use this information alongside other factors like credit scores and debt-to-income ratios to make informed decisions about their creditworthiness.

Asset verification

Credit card companies may consider applicants' assets, such as savings, investments, or real estate, as part of the income verification process. While assets don't always generate income, they can indicate financial stability and the ability to repay debts.

Do credit card companies know you're unemployed?

Credit card companies typically don't have direct access to information about your employment status unless you provide it to them during the application process. When you apply for a credit card, you may be asked to disclose your employment status and income. However, this information is self-reported and may not always be verified by the credit card issuer.

If you're currently unemployed or have limited income, it's important to be honest and transparent when applying for a credit card. Misrepresenting your employment status or income could have serious consequences, including denial of credit or account closure.

There are credit cards tailored for people with bad credit or limited income, such as secured credit cards or student credit cards. These cards may have more lenient eligibility requirements and can help you build or rebuild your credit while you're unemployed. You can also explore alternative sources of income, like freelance work and investments, which you can disclose to credit card issuers to strengthen your application.

How do you get a credit card without income?

Whether you're looking for credit cards for newcomers or individuals without a steady job yet, we've got your back. Obtaining a credit card without traditional proof of income can be challenging but not impossible. Here are some options to consider if you're looking for a credit card.

Get a secured credit card

Secured credit cards require a cash deposit acting as collateral against the credit limit. The deposit reduces the risk for the credit card company, making secured cards easier to qualify for for those with limited or no income or credit score. These are great credit cards for people with bad credit. Choose a secured credit card with terms and fees that align with your financial situation to ensure you can manage the additional credit responsibility.

Become an authorized user on someone else's account

As an authorized user on someone else's credit card, you receive a card linked to their account. You can use the credit card in-store and online at any store that accepts the card's network. Your credit activity may be reported to the credit bureaus to help you build credit. The primary cardholder's actions can impact your credit score, so ensure they maintain responsible credit habits.

Apply for a joint credit card

A joint credit card is shared between two individuals equally responsible for managing the account and repaying debts. Missed or late payments can harm both parties' credit scores. Joint cards have a combined available credit limit based on the creditworthiness of both individuals. Account activity, including payments and balances, is reported to credit bureaus under all cardholders' names.

Get a retail store credit card

A retail store credit card is issued by a retail store or a chain of stores rather than a financial institution. Cardholders can use their retail credit cards to make purchases at the issuing retailer or its affiliated brands. Retail store cards often have perks and benefits, like discounts at their stores and partner brands. They may have lower credit limits and higher interest rates than regular credit cards but may be easier to qualify for.

Apply for a student credit card

A student credit card is great for building your credit. These cards often have looser eligibility criteria and may offer benefits tailored to students, such as rewards for academic achievements or responsible credit use.

Credit builder loans

Some financial institutions offer credit builder loans. You borrow a small amount held in a savings account or certificate of deposit. As you make timely payments, the lender reports your activity to credit bureaus, helping build or boost your credit score. Once the loan is repaid, you may qualify for a traditional credit card.

Get a prepaid credit card

Prepaid credit cards are technically not credit cards because you load funds to spend rather than borrow from the credit card company. Since prepaid cards aren't linked to a line of credit, they typically don't require proof of income or credit checks. While prepaid cards are a great option for individuals with no or limited income, they also don't help you build credit since they don't report to credit bureaus.

List your household income

Credit card issuers want reassurance that you can pay your monthly statements. They may accept your overall household income to approve your application if it meets their income requirement. You may be able to include your spouse's income or combined household income on your application.

Alternative sources of income

If you have income from other sources than traditional employment, such as freelance work, rental properties, or government benefits, consider including this information on your credit card application. Some lenders accept alternative income sources when evaluating your creditworthiness.

Is it a good idea to get a credit card while unemployed?

Unemployment can lead to financial strain, making it harder to keep up with existing debt obligations. If you already struggle to make timely payments, adding more debt with a new credit card may not be a good idea. Too much outstanding debt leads to expensive interest payments and can be a red flag for credit bureaus.

Without a steady source of income, you may be more likely to rack up a monthly statement you can't repay. A missing credit card payment harms your payment history, and consistently missing payments causes your credit score to decline. A poor credit score makes it harder for you to qualify for credit accounts, or you may have higher interest rates and unfavourable loan terms.

If you have other sources of reliable income, like rental income, you may be able to manage monthly payments and keep your utilization rate low. Evaluate your financial situation and determine whether you can use a new credit card responsibly. Consider factors like your current income streams, existing debt, and credit score.

Factors that influence your credit score

A good credit score can strengthen your credit card application, even with limited or no income. Your credit score influences your ability to get credit and the terms of your loan. Individuals with a lower credit score may be at a disadvantage, whether they have a job or not. For example, you may not be able to get a personal loan with bad credit as lenders may view you as a risky borrower.

Credit bureaus use various information to give you a score based on their credit scoring models. Here's how a credit score is calculated:

• Payment history: Your payment history is the most significant factor in determining your credit score. It reflects whether you've made on-time payments for credit accounts, including credit cards and loans. Late payments, defaults, and bankruptcies in collections can harm your score.

• Credit utilization: Credit utilization refers to the amount of credit you're using compared to your total available credit. Keeping your credit card balances low can increase your score.

• Length of credit history: A longer credit history demonstrates your ability to manage credit responsibly over time. Credit card companies consider the age of your oldest account, the average age of your accounts, and the time since your most recent account activity.

• Credit mix: Lenders like to see a diverse mix of credit accounts on your credit report. Having different types of credit can indicate your ability to manage various financial obligations.

• New credit: Opening multiple new credit accounts within a short period can temporarily lower your credit score. New credit refers to the number of recently opened accounts, the number of recent credit inquiries, and the time since your last one.

• Hard credit inquiries: When you apply for new credit, lenders typically request a copy of your credit report and score, resulting in a hard inquiry on your credit report. Multiple hard inquiries within a short period can be a red flag for lenders.

Your credit card journey begins with KOHO

Finding a suitable credit card can be daunting, especially without a steady job and source of income. While a credit card can be helpful for everyday spending and emergencies, you want to ensure you can manage this debt responsibly.

KOHO offers various tools and expert guidance to support your credit card journey. Our virtual credit card provides cash back rewards, and the overdraft protection coverage gives you peace of mind if you exceed your credit limit. You can request a copy of your free credit score to ensure your credit-building efforts are progressing in the right direction.

Get access to expert advice, budgeting tools, and valuable insights into your financial habits to plan for spending and saving within your goals and budget. Whether you want to earn interest with a high-interest savings account or build your credit with KOHO, maximize your earning and rewards potential to reach your goals faster.

Learn more about how KOHO for businesses and individuals can support you every step of the way.