Many people wonder how receiving Social Security Disability income will affect their ability to obtain loans and credit. Does Social Security Disability go on your credit report? Does it make it harder to qualify for a loan? Is it possible to qualify for a mortgage? There are many things to consider when determining exactly how Social Security Disability will affect your credit eligibility. If you receive Social Security Disability payments and you want to know if you will be able to obtain the credit you need, here are some things to keep in mind.
What's Your Credit Score?
The first thing you need to consider when looking at whether or not you qualify for a loan or a credit card is what your credit score looks like. If you have a great credit score, the fact that you are on Social Security Disability benefits shouldn't have much of an impact on whether or not you qualify for credit cards and loans. If, however, your credit score is less than ideal, you may need to look into creative financing options for your credit needs.
What Type of Credit Are You Applying For?
Not all lenders look at income the same way and people who receive Social Security Disability benefits may find it easier to qualify for some types of credit than others. If you're applying for a personal loan and you don't have any income other than your Social Security Disability benefits, your chances of being approved may not be that great if your credit score is less than perfect. The reason for this is not because you are receiving Social Security Disability benefits. Rather, it is because personal loans are unsecured debt and most people who are receiving Social Security Disability have a limited income. The debt-to-income ratio, combined with your credit score, may prevent you from getting a traditional unsecured loan when receiving Social Security Disability benefits.
If, however, you are applying for a mortgage, your chances of getting the financing you need may actually be in your favor. The bank will look at the fact that your Social Security Disability income is guaranteed income. Certain government programs, such as FHA programs, can provide you with the loans you need to purchase a home as long as your debt-to-income ratio is within acceptable guidelines. You may be limited as to how much house you will be able to afford, but you should be able to purchase a home while receiving Social Security Disability benefits.
Be Wary of Predator Lenders When Receiving Social Security Disability
It is said that desperate times call for desperate measures, but never let your circumstances pressure you into taking out a loan you will regret in the future. Not all lenders are on the up and up, and many of the predatory lenders target low-income individuals and people who are receiving Social Security Disability benefits. Because of this, you need to avoid high-interest title loans and payday loans at all costs.
People who are living on Social Security Disability payments are already on a limited income. A title loan or a payday loan may seem like a good idea when you're in a bind and need cash fast, but the exorbitant interest rates charged by these lenders can eat up your Social Security Disability benefits, leaving you with less money to live on.
Do whatever you can to avoid predatory lending institutions. It is actually better to get a cash advance from your credit card company than it is to deal with a title loan company or a company offering payday loans to people who are on Social Security Disability.
It is important to understand that while receiving disability payments will not necessarily keep you from receiving the credit you deserve (assuming your credit rating is up to par), there are some lenders who do not like extending credit to Social Security Disability recipients. Contrary to what you may feel, this has nothing to do with your personal disability. The reason for this is that your Social Security Disability payments cannot be garnished to repay the loan should you default on your credit obligation.
If you are having a hard time qualifying for the credit you need, try building a good credit score by obtaining a pre-paid credit card. Make your payments on time and pay off any outstanding debt as quickly as you can. Your credit score will improve over time and you should qualify for the credit you need in the near future, regardless of whether or not you receive Social Security Disability payments.