Dear Penny: Is It Possible to Rebuild Credit Without a Job?

Dear K.,

First of all, let’s separate your credit history from your husband’s. You may have had joint accounts in the past, and if payments were delinquent, both of your credit reports and scores would have been tarnished. But your credit reports, which are used to tally your credit scores, are your own.

While a spouse can certainly help or hurt your efforts to build credit, ultimately the only way to establish credit is in your own name. Unless you have a co-signer or you’re applying for a card or a loan in both of your names, only your history will be considered if you apply for credit.

It’s important to think about your goals here. If you’re trying to rebuild credit so that you can get approved for a mortgage or a car loan on your own, that’s probably going to be tough without a job. But if your goal is simply to reestablish your credit, I think you’re in good shape to do so gradually.

The easiest way to build credit is with a credit card. You don’t need a job to get one. What you need is income. Your Social Security benefits may not be much, but they still count. If you have a joint bank account with your husband that his paycheck is deposited into or he regularly deposits money into your account, you’ll also be able to count that money as income.

Applying for a secured credit card, whether you’re rebuilding your credit or starting from scratch, is always a good move. You’ll put down a deposit — typically $200 to $500 — and use that as your line of credit. In these tough times, I get that not everyone can spare several hundred dollars for a deposit. If that deposit would set you behind on bills, you can’t afford to worry about your credit right now. Focus on building an emergency fund before you apply.

If you can afford the deposit, Capital One and Discover usually have good secured card options. (No, neither one paid me to say that.) Because you’re putting down that deposit, the credit and income limits are much less strict. Some cards will let you automatically convert to a regular card once you’ve made a certain number of on-time payments.

Look for a card with the lowest possible annual fee and APR. You’ll want both to be as low as possible, of course. But hopefully you’ll be paying off the balance each month so that the APR won’t matter to you. Also make sure the card issuer reports to all three bureaus so that you’re building a credit history.

The most important thing you can do is simply pay the bill on time each month. Payment history is the most important credit factor, determining 35% of your score.

You also need to be careful about how much you’re charging. Your credit utilization ratio, or the percentage of open credit that you’re using, accounts for 30% of your score. I’d recommend making a small purchase each month that you’d make, card or no card, that doesn’t cost more than 10% of the card’s limit. Then, pay it off in full each month.

If you do everything right, your credit could start to improve within about six months. Any negative information that’s on your reports, like late payments or accounts that went to collection, will stay there for seven years, but the damage will start to fade after two.

The key to fixing bad credit is to make sure you’ve addressed any underlying issues, as well. Some people wind up with credit problems because of a crisis that was out of their control. But if overspending was a problem in the past, make sure you have a plan to pay off every purchase you make each month. Living without credit, as you’re doing now, is tough. But it does force you to limit your spending to what you’re bringing in. Make sure you don’t change your spending once you have greater access to credit.

One thing you don’t say is whether your husband wants to fix his credit, too. While your credit reports are separate, this will be a lot easier if both of you share this goal. It’s essential that you make a budget together and hold each other accountable. Encourage your husband to apply for a secured credit card as well. All the discipline in the world on your part won’t go far if you’re not in this together.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.