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For People With a Disability, Credit Is Key in a Crisis

FAt the time Irene Noon Kai was young, her mother taught her how to manage money. This is a good thing for every parent, but for Noon Kay, it was essential. She was born with cerebral palsy. In addition to the general budget, she needed to know how to deal with the confusing system of government benefits.

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

“I don’t think we serve disabled people when we try to provide shelter [them] From the realities of their lives,” says Nun Kay, 33. As if my mom was going to protect me from all these facts, it would have been a huge shock. “

Credit is an area that is often overlooked in financial management. Having good credit (FICO scores of at least 690) means access to options in the event of an emergency – for example, if you lose your job or are unable to work.

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 Institute on Disability. He predicts that the disability community is one of the most invisible groups, making emergency management even more difficult.

For some, getting into debt is the only option

After all, the solution isn’t always as simple as spending less money: If you have a disability, some of the expenses often seen as luxuries are absolute necessities.

Foley gave the example of someone’s air conditioner going out in the middle of summer. If you are a disabled person and live in Georgia, fixing that is not a luxury; It may be necessary to survive. Unfortunately, if you also have poor credit (FICO scores of 629 or lower), your options for covering these expenses are limited.

“All of these things are kind of a conspiracy to put someone in a really vulnerable economic position, which makes managing any debt that much more difficult,” Foley says.

A 2017 NDI analysis of survey data from the Financial Industry Regulatory Authority, or FINRA, found that people with disabilities are less likely to use credit cards than the general population and more likely to struggle with debt and use “alternative credit services” such as pawnshops and payday loans. Payday loans can come in annual rates of over 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 better options, including low-interest loans and 0% APR advance credit cards.

How to start building your credit

Building your credit can be a challenge if you are struggling financially. But this is not impossible. Mostly, it’s about learning how to manage whatever debt you get into. In fact, Noon Kai credits her mom’s financial lessons to her good credit today.

Here’s how you can get started:

Open an account reported to the credit bureaus

Most credit scoring forms don’t keep track of rent or utilities 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 balance, and there are options for those with poor or poor credit. (More on that below).

Make payments on time

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

But remember: just paying your minimum balance isn’t a great long-term solution. The interest on a credit card will likely be much lower than a payday loan, but the APR will usually still be double digits.

If you’re struggling to make your minimum payments, be proactive and contact your credit card issuer first. Your issuer may have a difficulty program to help lower your monthly payments and keep your account in good standing.

Credit cards that can help

If your balance is less than ideal, you may have trouble getting approved for many credit cards, including most rewards cards. But you still have a few options:

Secured credit cards

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

Since the deposit reduces the risk of card issuers, it is easier for applicants with poor or destitute credit to get approved. In fact, it’s possible to find secure cards that don’t require a credit check at all, or even a bank account — although these products may have other drawbacks, such as annual fees or a lack of upgrade paths for higher-tier cards.

“Alternative” credit cards

Depending on your credit score, you may be able to qualify for an alternative, unsecured credit card that can use non-traditional underwriting criteria to make approval decisions. These cards may still take a look at your credit history, but they will also take into account other factors such as income, employment, and banking information.

This would not be the best option for everyone. If your income is limited or fixed, you may have some trouble getting approved. But it is 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 of 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 kicking theirs.

As an authorized user, you can have your physical card and make purchases with it, although this is not required; Your credit can earn interest without having to use the card.

But authorized users generally do not have the ability to make changes to the account, nor are they responsible for making payments on it. This responsibility lies with the primary account holder, which means that it is wise for both of you to set rules and expectations beforehand. If you collect fees that the primary account holder cannot pay, each of you could suffer negative effects on your balance.

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Caitlin Mims writes for NerdWallet. Email: cmims@nerdwallet.com.

An article for people with disabilities, Credit Key in Crisis, originally appeared on NerdWallet.

The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

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