New Fed Rule Makes it Harder For Stay-at-home Parents to Build Credit

Because “Life is what happens when you’re making other plans,” it’s important for every individual to have credit in his or her own name.

You may use credit only as half of a married couple, and you may never need to use your own personal credit. But since things like illness, death, and divorce have a way of changing things, it’s best to have it, just in case.

If you don’t have a credit card in your own name right now, get one before October 1, 2011.

That’s when the new Fed rule goes into effect – making it impossible for anyone without their own source of income to obtain a credit card.

The new rule was announced on March 18, and the credit card companies have until October 1 to come into compliance. However, some of them implemented the rule  immediately, so you may have to shop around.

According to the rule, credit card companies will not be allowed to consider “total household income” when determining whether a new applicant qualifies for a credit card. Thus, if you’re a stay-at-home mom or dad, or if you’re a college student with no income, you’ll be denied.

The new rule states that the card issuer must consider the applicant’s independent ability to make the payments, regardless of the consumer’s age.

According to the Fed, this rule is simply a clarification of the guidelines set forth in the CARD Act of 2009. However, that act’s authors say that this rule goes beyond the scope and intent of the Act.

Opponents of the rule say that the Fed has just undermined more than a generation of progress made since the passage of the Equal Credit Opportunity Act of 1974 – and has put abused, divorced, or widowed homemakers at serious risk.

Supporters advise the stay-at-home parent to get a joint account with their spouse, or to become an authorized signer on the spouse’s account. This would hardly  be useful for a woman escaping an abuse situation – since that abusive spouse could simply close the account. In addition, many widows have found themselves with no available credit after the death of a spouse.

Thus, the social impact of this ruling is significant and is opening up new avenues of debate. In addition to undermining the financial safety of a non-working spouse, opponents say that the Fed has effectively said that the parent who “keeps the home fires burning” has no value.

Those who praise the rule seem to be of the “Big Brother” mindset – saying that this rule will protect consumers from having credit they can’t afford to repay, will prevent impulse buying with instant credit in retail stores, and will protect working spouses from liability for accounts they don’t know about.

Although the rule was put into effect quietly, I think we can expect to hear more about it.

How the rule will be applied in community property states, where a spouse has legal claim to half of all money coming into the marriage, remains to be seen.

Meanwhile, be safe. If you don’t have any credit in your own name, find a bank that has not yet put the new rule into effect, and get your own credit card before October 1.

Comments are closed.

Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.