If you are living on a fixed income as I do then you are probably no stranger to the inability to get even a modest amount of credit. But I am here to tell you that it is entirely possible to get a revolving credit account to build your credit history.
Disclaimer
I am not saying that this will fix your specific situation, I am merely sharing what has worked for me. So take everything I say here with a grain of salt. I am not a financial expert and you definitely should use your best judgment in all of your financial decision. I will not be held liable for any loss you suffer.
Know Your Credit Score
Before you can begin to build credit it is a good idea to know what your credit score is. There are many ways to get your credit score but the best and easiest way I have found is Credit Karma. The best part of credit karma is that it’s free and it not only shows you your credit score but helps in other ways. You can get an app for your phone and check your credit score any time you want. A perfect credit score is 800, and it goes down from there, 300 is the absolute worst score you can have.
Prioritize Your Bills
I think this should go without saying but your household bill must have priority, rent, utilities, etc. If you can’t pay those you won’t be able to pay any other bills either. Don’t forget about food either, everyone has to eat including you. If you are eligible for food stamps then get them if you don’t already.
Know How Much You Can Afford
Most financial advice that I have been given over the years includes some form of budgeting. I’m not going to do that here, I’m the last person to be giving that advice. I’ve never been able to stick to a budget and it’s pointless to try. But I will say this have the self-discipline not to overspend, when you run out of money stop spending!
This is essential when you are living on a fixed income, as long as you have some money left over after paying the essential bills you can attempt to build some credit. I realize that life happens and some situations are just impossible, believe me, I’ve had my share of financial woes.
Minimize or Eliminate Stress
Just take a deep breath prioritize the essentials and put the rest on the proverbial back burner, they aren’t going anywhere. This may seem like bad financial advice and it probably is, like I said I am not a financial expert. But unless you owe the IRS or other government tax authorities, you are probably not going to get what few assets you have seized and put out on the street.
Seriously, your health and well-being are more important than some bills you can’t afford to pay what they are demanding, be it medical or whatever. Offer them five bucks a month and if they won’t take it don’t pay them until you are in a position to do so.
Having Bills in Collection is Not the End of the World
I know it seems counterintuitive to be seeking out credit when you have outstanding bills in collection. I’m a veteran living on a fixed income, I have a disability rating with the VA. Naturally, I qualify for a zero-down home loan through the VA. But the VA does not lend the money they just guarantee the loan through other lenders. While there is no set credit score requirement the lenders themselves have their own requirements. I found one lender that would go as low as 580, but my credit score was below that.
While speaking with a loan agent about my situation he told me that the biggest problem is that I have no credit history. He said this at a time when I was stuck in a never-ending negative loop. I have no credit history because I have no credit, and I have no credit because I have no credit history and outstanding collections. Who’s going to give me credit when I can’t pay my creditors?
Where to Get Credit
Who indeed, that was the $25,000 question. Credit Karma had credit card offers for secured credit cards but most of them required at least $200, and who on a fixed income has $200 to spare? I sure as Hell didn’t. But if the Army taught me one thing that was to never give up. If something blocks your path you move it out of the way, if you can move it you go around it. You do whatever it takes to complete the mission.
To get the credit you just need to find someone somewhere that is willing to take a risk on you and offer you just a little bit of credit. It does not have to be a lot, it just has to go on your credit history. For me, that was Finger Hut. It was my saving grace, I applied for a finger hut account and they said yes. They gave me a $300 limit and for the first purchase, I needed to pay a certain percentage upfront and the rest on a revolving credit account. So I bought a digital camcorder and a tripod, and oh hallelujah I had a new credit account.
Once You Get the Credit Don’t Go Crazy
That natural instinct, once you get credit, is to spend, spend, spend. Don’t do that or you will end up with no credit and a crappy credit score. Buy one or two things and make the payments on the account, make it part of your essential bills, and pay the confounded bill.
They took the risk and gave you a chance, don’t blow it and keep your new credit debt-to-income ratio under 30 percent. If you come into a lump sum of cash, such as when the government sent out stimulus checks to everyone, the pay off the credit account. Paying off a credit bill looks very good on your credit report, a good credit history equals better credit scores. Better credit scores equal better opportunities for credit.
Stay Away from Major Credit Cards
Once you have established a more favorable credit history you will begin to start receiving credit card offers. Do yourself a favor and throw them in the trash, unless your annual gross income is in the neighborhood of fifteen or sixteen thousand dollars annually you will in all likelihood be rejected. Too many credit inquiries can negatively affect your credit score, aside from this the interest rates are stupidly high, and having a general-use credit card opens you up to the temptation of going crazy.
There is one credit card I might suggest once you have established credit elsewhere, and that is Care Credit. This credit card is for healthcare expenses like prescriptions, eyeglasses, etc. But the best part about Care Credit you can also use it for veterinarian care for your pets too, which is nice because vets don’t usually give credit.
A Final Word
As I have stated above this is what worked for me, maybe it will work for you I don’t know. But I do want to address the elephant that may be in the room. That is if I am on a fixed income, how can I afford this website? I don’t have sponsors or ads, yet, so how did I set this all up with so little money? Would you believe that I only paid $12? No? Well, it’s true. Let me know in the comments if you want to know how I did it.