Friday, March 25, 2011

“No Credit for Stay at Home Parents”- Federal Reserve

I realize this topic falls *completely* outside the general focus of my blog…however. A sweet friend of mine brought it to my attention and I had to share it.

On March 18, the Federal Reserve issued a new rule stating that “credit card companies can no longer consider household income when assessing the creditworthiness of an individual who applies for his or her own card. Under the rule, only an individual's own salary or other income -- rather than combined household income -- can be considered.

One major effect of the new regulation: Stay-at-home moms (or dads) without significant outside income no longer will be able to open their own credit card accounts -- and establish their own credit histories to build their credit scores. Compliance with the rule is mandatory by Oct. 1, 2011, though credit card companies can begin operating under it immediately….

Previously, an individual member of a household could qualify for a credit card account by pointing to the combined income of several members of that household. For instance, in the case of a married couple, a stay-at-home wife without any independent income could qualify for and obtain a credit card under only her own name -- and establish her own credit history -- by pointing to the salary of her husband.

That no longer will be the case. Now, she must prove that she can make the payments with only her own resources, a nearly impossible hurdle for many homemakers to overcome.

"They're going to be stuck, really stuck," said Barbara Shapiro, a Boston-area registered investment adviser, vice president of the HMS Financial Group and a certified divorce financial analyst. "It makes these people completely unable to buy an airline ticket, rent a car or do anything that requires a credit card.” {Emphasis mine} (Read more here)

So, my fellow moms. What do you think about this new rule? Do you already have your own established credit history? Or is it entirely based on your spouse’s income? {I know mine is the latter.}

I admit, I can see both sides of the issue.

1) I certainly don’t want to get stuck with payments I can’t afford should anything happen to my husband. BUT…

2) If I need to get a rental car or…(insert scenario here), I want to be able to do just that—without any difficulty. Baring teeth smile

The floor is now open for discussion…


North Laurel said...

Very interesting. It does make sense from one point of view (they want to make sure that the credit is paid) yet it does put those who are in this type of situation in a bit of a tough spot. I rely on my hubby for income- I've no other source. Perhaps a credit card can be issued still in the spouses name, yet it would still be under the husbands name on the account?
And what of those wives who have credit cards/lines of credit already- will those be affected?
Interesting indeed. Personally, I would not like to have a credit card at all but some times it is the only way to do things! (Such as renting a car- some places won't accept a debit)

Unknown said...

I was wondering the same thing (if this affects those w/ credit cards already based on "household income" and not personal. My concern too, is how this will affect things for my daughters in the future should they choose to become stay at home moms. What if--heaven forbid--something happen to their spouses? How will they establish their own households in the event of death or divorce? How will they get an apartment/house, car...anything??

I understand the credit card companies are in a bit of predicament with the economy and people having a hard time repaying their debts. But I think this new rule will have far reaching--possibly very damaging--affects on future generations of stay at home parents.


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