New Rule Makes It Easier for Stay-at-Home Spouses to Get Credit

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A new rule allows stay-at-home spouses and other nonworking household members over the age of 21 to more easily obtain credit in their own names.

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In 2009, the Credit Card Accountability Responsibility and Disclosure (CARD) Act was passed. One part of the CARD Act, the “independent ability to pay” rule, restricted consumers from obtaining credit unless they could show income of their own, and required credit card issuers to verify that an applicant had the independent ability to pay his or her bills before offering credit. The rule was designed to prevent college students and other financially inexperienced consumers from obtaining easy credit and falling into more debt than they can handle.

Since the law passed, the industry has recognized that some otherwise creditworthy individuals have been unable to get credit. An unintended side effect of the law was that some stay-at-home spouses and other people with access to money but no income of their own were routinely turned down.

Stay-at-Home Spouses Qualify for Credit Cards More Easily Now

This year, the Consumer Financial Protection Bureau lifted the restriction. As of November 4, 2013 credit card issuers may consider household income, not individual income, when a person over the age of 21 applies for a credit card. According to an April press release on the CFPB’s website, card issuers may “consider third-party income if the applicant has a reasonable expectation of access to it.” The result is that many stay-at-home spouses in good financial standing and with access to their partner’s income will qualify. The new rule affects a significant number of consumers; at least 16 million married people in the U.S. do not work outside the home.

The new rule kicked in just in time for the shopping season. Experts expect it to have at least two distinct benefits. First, more access to credit will have a positive impact on retail sales this holiday season. Second, non-working spouses will now be able to build their own credit history and credit score far more easily than they could before the change.

The downside is that if a couple breaks up and the nonworking spouse loses access to the partner’s income, he or she could have a hard time making payments against debt and a downward financial spiral could easily ensue. To mitigate this risk, issuers are expected to weigh other factors besides access to money in determining creditworthiness. And cardholders are advised, of course, to avoid carrying a balance.

Kimberly Rotter
Kimberly Rotter is a writer and editor in San Diego, CA. She and her husband have an emergency fund, two homes, a few vehicles, a handful of modest investments and minimal debt. Both are successfully self-employed, each in their own field. Learn more at RotterWrites.com.

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