For someone like a stay-at-home parent who doesn't work outside of the home and have their own income, it can be difficult to build a credit history, because most credit card companies won't issue a credit card to someone who doesn't have their own income.
The Consumer Financial Protection Bureau (CFPB) has recognized that and last week announced it was proposing a regulation that would allow a stay-at-home spouse or partner to be able to use shared income from the spouse or partner on a credit card application.
“When stay-at-home spouses or partners have the ability to make payments on a credit card, they should be able to obtain a card in their own name,” said CFPB Director Richard Cordray in a statement. “Today the CFPB is proposing common-sense changes that would facilitate credit access for spouses or partners who do not work outside the home.”
People who rely on a spouse or partner for income have a hard time getting credit due to one of the measures in the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), which was enacted in 2009. Under this law, credit card issuers must evaluate all adults aged 21 and older who apply for a credit card to see if they have an independent income and would be able to make credit card payments. Without an independent income, these people can't get credit cards.
For people like parents who choose to stay at home to take care of their children, this becomes a hassle when trying to establish credit history or even have a credit card that's separate from a spouse or partner's accounts.
Before it wrote this proposal, the CFPB collected data that suggested individuals were denied credit cards, even though they were generally credit-worthy and could make the necessary payments. As the CFPB investigated this scenario by talking with members of the industry, it discovered that most of the people affected by these regulations could be stay-at-home spouses or parents who access the means to pay credit cards through their spouse or partner.
The CFPB then decided to write a revised regulation that would allow adults 21 and older to apply for a credit card if they have no income of their own. Applicants wouldn't necessarily have to be married. They would, however, need to be able to regularly tap into the income of a spouse or partner in order to make their card payments or have access to such an account. Credit card issuers wouldn't consider "household income" due to the fact that all cohabitations don't mean some form of domestic partnership. This is the case in a situation where a person may have a roommate, but the roommates may not even know each other's income, much less share it.
If the proposal were enacted, it would allow millions of people to be considered for credit card accounts who currently wouldn't be able to maintain an individual account of their own. Credit card applications may also look a little bit different because credit card issuers would have to ask questions not only about actual income, but also about income and assets a person could access.
While this regulation would help many people gain credit, the CFPB does note in its proposal that there may be some instances where a credit card applicant without his or her own income might still need someone to co-sign on an application to guarantee income. One example of this would be if the stay-at-home applicant is under 21.
Statistics from the U.S. Census Bureau state that over 16 million married people are not employed outside the home, which is about one of every three married couples.
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