- Personal Finance
Can You Get a Credit Card On a Low Income?
A lot of people who are on a low income automatically assume that credit card companies won't be interested in approving them for credit cards due to fears that the possibility that they won't be able to meet the repayments. While a low income can count against you for some lenders, this won't always be the case, especially if your credit history is generally good and you're not prone to maxing out your income. If you're wondering whether it's worth putting in a credit card application when your income isn't at all high, here are a few things to think about before you go ahead.
Look at your credit history
Generally speaking, lenders will always look at your credit history when they're deciding whether to approve your credit card application. If your credit history isn't good and you've missed payments and used up significant proportions of your available credit limit(s), there's a good chance that you'll be declined even if your income is very good. When it's combined with a low income though, lenders will be even more scared that you'll default on your repayments and most will deem you to be an even bigger credit risk.
Look at your spending
If you're spending the majority of your income, this is another red flag that can count against you due to the fact that there would be very little of your disposable income left over for debt repayments and the chances that you'll ultimately default is higher.
To change this situation, there are two main changes. First, you can try cutting your regular outgoings by doing things like shopping around to get better deals and switch utility suppliers if you can get cheaper services elsewhere. Unless you're already living extremely frugally, there's a good chance that you'll be able to make some cutbacks here and there to free up some extra cash. Second, you can try increasing your income, perhaps through a second job or by doing some freelance work. This can be more difficult than cutting your expenses as it relies on there being jobs available to apply for. If you can combine both options though, you can go some way towards making your spending look less of a minus point in relation to your income.
What if I'm approved?
For individuals on a low income, an approval tends to mean that you'll be given lower lines of credit in comparison to people who have more income at their disposal and in some cases, this could be as little as $500 (or even less than this). Because you've got less credit available to you, it's much easier to max this out.Once you've proved that you can handle this credit responsibly without going up to or beyond your credit limits, you may find that your available credit is extended.