Disability and Credit Access: Why Scores Are Key in a Crisis

From the time Erin Noon Kay was little, her mom taught her how to manage money. This is a good thing for every parent to do, but for Noon Kay, it was essential. She was born with cerebral palsy. And in addition to general budgeting, she needed to know how to navigate the confusing government benefits system.

Noon Kay — who founded Claiming Disability, a company that advocates for people with disabilities through outreach activities and media representation — explained that many people who are disabled don’t handle their own finances. Instead, their finances will be managed by a nonprofit or their parents, meaning they don't learn the skills themselves.

“I don’t think we’re doing disabled people a service when we try to shelter [them] from the reality of their own life," says Noon Kay, 33. "Like if my mom would have sheltered me from all of these realities, it would have been a huge shock.”

An often-overlooked area of financial management is credit. Having good credit (FICO scores of at least 690) means having access to options in an emergency — if, say, you lose your job or are unable to work.

But people with disabilities are already less likely to work full time and tend to earn less on average than those without disabilities, says Tom Foley, executive director of the National Disability Institute, or NDI. And he speculates that the disability community is one of the most credit-invisible groups, making emergencies harder to manage.

For some, going into debt is the only option

After all, the solution is not always as simple as spending less money: If you have a disability, some expenses that are often seen as luxuries are absolute necessities.

Foley gave the example of someone’s air conditioning going out in the middle of summer. If you have a disability and you live in Georgia, getting that fixed is not a luxury; it’s probably necessary for survival. Unfortunately, if you also have poor credit (FICO scores of 629 or lower), your options for covering such emergency expenses are limited.

“It’s all of these things kind of conspiring to put someone in a really vulnerable economic situation, which makes it a lot harder to manage any debt,” says Foley.

A 2017 NDI analysis of survey data from the Financial Industry Regulatory Authority, or FINRA, found that people with disabilities are much less likely to use credit cards than the general population and are much more likely to struggle with debt and to use "alternative credit services" like pawnshops and payday loans. Payday loans can come with APRs upward of 300%.

If you have bad credit, or no credit at all, there are alternatives to payday loans that will be easier to pay off. But those with good credit have even better options, including low-interest loans and 0% intro APR credit cards.

» MORE: NerdWallet's best 0% credit cards

How to start building your credit

Building your credit can be a challenge if you're struggling financially. But it’s not impossible. Mostly, it comes down to learning how to manage any debt you acquire. In fact, Noon Kay credits her mom’s financial lessons with the good credit she has today.

Here's how you can get started:

Open an account that gets reported to the credit bureaus

Most credit scoring models don’t keep track of rent or utility payments, but credit cards and loans are generally reported to the three major credit bureaus. Getting a credit card is one of the easiest ways you can be sure that your account will actually help your credit, and there are options for those with poor or thin credit. (More on that below.)

» MORE: Using a credit card to build your credit

Make on-time payments

Once you have an account that’s reported to the credit bureaus, make every payment on time because that’s among the most important factors in your credit scores. If you have a credit card, you don’t even have to pay off your entire balance. As long as you pay your minimum payment, you’ll be able to protect your credit.

But remember: Merely paying your minimum balance isn't a great long-term solution. Credit card interest is likely to be much lower than a payday loan, but the APR will still typically sit in the double digits.

If you’re struggling to pay your minimum payment, be proactive and contact your credit card issuer first. The issuer might have a hardship program to help lower your monthly payments and keep your account in good standing.

» MORE: Why are credit card interest rates so high?

Credit cards that can help

If your credit is less than ideal, you might have some trouble getting approved for many credit cards, including most rewards cards. But you do still have some options:

Secured credit cards

Unlike other credit cards, secured cards require a cash deposit upfront. Once you close the account in good standing — or are able to upgrade it to a traditional unsecured card through responsible use over time — you'll be able to get that deposit back. Major issuers like Capital One and Discover offer secured credit cards.

Since the deposit reduces card issuers’ risk, it's easier for applicants with poor or no credit to get approved. In fact, it's possible to find secured cards that don't require a credit check at all, or even a bank account — although such products may have other drawbacks, like annual fees or no upgrade paths to higher-tier cards.

'Alternative' credit cards

Depending on your credit scores, you might be able to qualify for an unsecured alternative credit card that can use nontraditional underwriting standards to make approval decisions. These cards might still look at your credit history, but they’ll also consider other factors like income, employment and banking information.

This isn’t going to be the best option for everyone. If you’re on a limited or fixed income, you might have some trouble getting approved. But it's an option to consider if your credit history is weaker than the rest of your financial history.

Become an authorized user

You can also build credit by becoming an authorized user on someone else’s credit card account. You’ll want to ask someone who has good financial habits and makes every payment on time, since you’re building your credit by piggybacking off of theirs.

As an authorized user, you can get your own physical card and make purchases with it, although that's not required; your credit could see a benefit without you ever having to use the card.

But authorized users generally don't have the ability to make changes to the account, nor are they responsible for making payments on it. That liability falls to the primary account holder, meaning it's wise for the two of you to set rules and expectations in advance. If you rack up charges that the primary account holder cannot pay back, each of you may suffer negative impacts to your credit.