Wards Credit Plan

Social Security & Credit

hand holding coins experian report with credit cards highlighting how to maintain credit while on social security chapter six

Created in collaboration with the credit experts at Experian

If you are receiving Social Security benefits, you may have questions about whether your credit will be affected and what kind of credit you can qualify for on a fixed income. This chapter will answer the following questions:

Does Receiving Supplemental Security Income (SSI) Affect Your Credit?

Your credit report does not list income information, so receiving Supplemental Security Income, or retirement benefits, through Social Security will not appear as part of your credit report and has no impact on your credit history or your credit scores.

However, the lender you are applying with may request information from you about your income, whether it be from Social Security or other sources. Therefore, your total income may be a factor for a lender deciding whether to approve your application for a new credit account.

What Types of Credit Are Available for Those Receiving SSI?

The types of credit you may qualify for while receiving retirement benefits depend on the criteria of the lender with which you are applying. Your credit history will play a major role in determining whether you are approved for new credit, regardless of your income.

The stronger your credit history, the better your chances of being approved.

Some lenders may be more likely than others to approve credit for someone who has a limited income. For instance, it may be difficult to qualify for an unsecured personal loan if you don’t have a certain level of income. On the other hand, you may find it easier to get approval for a home loan because the mortgage lender will view your retirement benefits as guaranteed income.

Can You Qualify for Personal Loans on SSI?

Whether you qualify for a personal loan while receiving Supplemental Security Income will depend on your credit history and on the criteria of the lender you are applying with. The stronger your credit history, the better your chances of being approved for any type of credit.

Typically, the lender will ask you for income information as part of the application process. They are required to document that you have the ability to repay the debt. Having a limited income may make it more challenging to qualify for a traditional unsecured personal loan. If you have been unable to qualify for a personal loan, consider opening a Montgomery Ward line of credit. A Wards Credit account with a low balance and a history of on-time payments will help demonstrate your ability to repay debt and can improve your credit score.

Beware of lenders who prey on low-income individuals, including those who receive retirement benefits.

title and payday loan proceed with caution warning

For example, title loans and payday loans have extremely high interest rates and can be very difficult for someone on a limited income to pay off once interest starts accruing. Unless you can repay the loan in full right away, the interest can cause the balance on the account to grow rapidly. Payday loans typically require repayment of the entire amount borrowed with the next check you receive.

Vehicle title loans require you to guarantee the debt with the value of your car. If you can’t pay on time, usually within 30 days, the lender can take your car. Learn more about repossession if this has happened to you or if you’re at risk of it happening.

Can You Qualify for a Credit Card on SSI?

As with a loan, qualifying for a credit card account while receiving Supplemental Security Income will depend on the strength of your credit history and the criteria of the credit card provider. Both your credit history and the income information you provided will be considered when deciding whether to extend credit.

If you are approved for the card, keep your balances low and always make your payments on time. Pay the balance in full each month if possible. When you are living on a fixed income, extra expenses such as late payments and interest fees can add up quickly.

If you don’t qualify for the credit card you want right away, consider applying for a secured credit card account. With a secured card, you put a certain amount of money down as a deposit in exchange for a credit card with a small credit limit. If you use the card responsibly, making small purchases each month and paying the balance on time, the bank may be willing to convert your account to a traditional credit card. Before applying, ask the company whether they report their secured credit card accounts to the credit reporting agencies. If they do, your on-time payments can help you build a stronger credit history for the future.

Another alternative is opening a credit account with a retailer who reports payment activity to credit bureaus, like Montgomery Ward. This is also effective way to build a history of on-time payments which can positively impact your credit score.

How Can I Protect My Credit on SSI?

When you are living on a limited income, it is more important than ever to not over-spend and accumulate more debt than you can comfortably afford.

It’s also very important to maintain a positive credit history. The better your credit scores, the more likely you are to qualify for the credit you need at the best interest rates available.

four tips to protect credit on social security

The most important factor in credit scoring is your payment history.

Always make all payments on time – doing so not only protects your credit rating, it also ensures that you aren’t spending money on late fees.

The second most important factor in credit scores is your utilization rate. Your utilization rate is calculated by taking the total of all your credit card balances and dividing that number by the total of all your credit card limits. The lower your utilization rate, the better.

Whenever possible, you should pay your credit card balances in full each month. Doing so helps to keep your balances low and avoids spending money on interest fees.

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