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Government assistance programs, like the Supplemental Nutrition Assistance Program (SNAP), often help those in dire need. In 2020, an estimated 42 million people received SNAP benefits. 

Unfortunately, some may incorrectly believe that government assistance programs have a negative effect on people’s credit. The good news is that the answer is no, government assistance programs don’t affect your credit—including the food stamps program (SNAP).

Government assistance programs and your credit

Public assistance programs can be broken up into two major categories: social welfare programs and social insurance programs. These programs are meant to provide cash or in-kind benefits to those in need. Eligibility for program enrollment is usually determined by income. 

There are many different types of government assistance programs that aim to target particular groups or solve specific problems. Some of the most common programs are the following.

Welfare programs, such as:

• Temporary Assistance for Needy Families (TANF)
• Supplemental Security Income (SSI)
• Special Supplemental Nutritional Program for Women, Infants and Children (WIC)
• General Assistance (GA)

Medicaid

Unemployment

Housing assistance

Earned Income Tax Credit (EITC)

SNAP (formerly known as the food stamp program)

Many people are surprised to realize that your income has no impact on your credit. Your credit report and credit score are made up of information about how you handle your creditors and lenders. Your credit report doesn’t list your income. Since government assistance programs are income-based, it makes sense that they wouldn’t affect your credit. Being enrolled in programs like SNAP won’t show up on your credit report and therefore can’t be used against you when evaluating your credit. 

In fact, using these programs to your advantage can actually benefit your credit score. It can free up the limited income you have to focus on other important areas, like paying your bills on time and paying down debt. 

Food stamps and your credit

The Supplemental Nutrition Assistance Program (SNAP) is a federal program that looks to help provide food-purchasing assistance to low- and no-income people. SNAP was previously known as the food stamp program.

In 2019, one survey found that 38 million people received SNAP at some point during the year. A large portion of the American population relies on these benefits to put food on the table for themselves and their family. 

Once you’re approved for SNAP, you receive a card that acts almost like a debit card. Every month, a balance is loaded onto the card and you can shop at retailers and farmer’s markets that accept SNAP benefits. The amount you receive every month will depend on your income and household size. 

Food stamps or SNAP benefits will not impact your credit. And the amount you receive on your SNAP card is not considered taxable income. Following federal law, the IRS, state and local taxing authorities may not tax SNAP benefits. Therefore, you don’t need to declare SNAP on your annual tax return as part of your income. 

Can I get a new loan while on government assistance?

You can potentially get a new loan while on government assistance, but approval will largely depend on the lender and their requirements. Government assistance programs aren’t listed on your credit report, so the lender won’t necessarily know you’re enrolled in these programs. Instead, the lender will likely focus on your income, credit score and ability to afford the loan.

If your credit score is strong and you can prove that you can make payments, your chances of being approved for a new loan increase. Some programs, such as government-backed mortgages, even offer loans specifically to people with low income. 

What does impact your credit?

Now that you know government assistance doesn’t impact your credit, it’s essential to look at what does affect it. Your credit score is made up of five factors, all given a different weight:

It’s important to keep all five of these credit factors in mind when dealing with your finances. You’ll want to pay your lenders on time, keep your debts low and be mindful of hard inquiries. 

How to improve your credit while on government assistance

Building healthy credit can help open the door to many new opportunities for you. Luckily, it’s possible to improve your credit while on government assistance.

Some of the steps you can take include continuing to pay down your debts, creating and sticking to a budget and working with a credit repair advocate. CreditRepair.com offers professional credit repair services to help individuals review and repair their credit as efficiently as possible. You don’t have to do this all alone! 

Elizabeth Whiting started with CreditRepair.com in the summer of 2018 as an inbound member services advisor. Recognized several times for her outstanding performance, she quickly advanced within the company. Her genuine desire to help people blossomed into joining the learning and development department as an associate trainer in the late spring of 2020. As an advocate for other’s success, Elizabeth promotes self-development with her internal peers though education, encouragement and support. Utilizing her credit expertise, she has empowered numerous consumers to continue to work towards resolving difficult credit situations and strive to achieve a lifestyle of greater opportunity.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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Getting rejected for a credit card won’t directly hurt your score, but credit card applications can affect your score in different ways—whether you’re approved or not. 

In this post, we’ll walk you through the credit card application process and how it affects your credit.

How can a credit card application affect your score?

A credit card application can impact your score in two ways: as a hard credit inquiry or as a new line of credit. 

Hard credit inquiries

When you apply for most types of credit, the lender will look at your credit history to understand your creditworthiness. There are two types of credit inquiries: soft and hard.

A soft inquiry has no effect on your credit score (although it’s recorded). Checking your own credit score is an example of a soft inquiry.

A hard inquiry, on the other hand, is what happens when a lender checks your credit history when you apply for a loan or a new credit card. A hard inquiry won’t lower your credit score by itself, but too many hard inquiries in too short a time frame will.

Most of the time a credit card application requires a hard inquiry, leading to a potential drop in your credit score. Hard inquiries stay on your credit report for up to two years.

It’s important that you spread out credit applications throughout the year. The good news is that lenders always have to ask your permission when conducting a hard inquiry, so you can maintain control over how many hard inquiries are pulled and when. 

A new line of credit

Although getting rejected for a credit card won’t lower your credit score, getting approved might. Your credit score is made up of five factors:

• Payment history (35%)
• Credit utilization ratio (30%)
• Credit history length (15%)
• Credit mix (10%)
• New credit (10%)

When you get new line of credit, such as a new credit card, your credit score may slightly decrease. Don’t worry, though—this decrease doesn’t usually last long. 

Why your credit card application was denied, and what can you do about it

When you’re denied credit, the lender is legally obligated:

• To tell you why through an adverse action notice
• To tell you how to see the credit report they used to make their decision

You can access free copies of your credit report at annualcreditreport.com to understand what the lender saw.

Depending on why your application was denied, there might be steps you can take to increase your chances for approval in the future. For example, if your credit utilization is too high, you can spend just a few months bringing down your credit ratio.

But if you were rejected because of something more serious, like a recent collections account, you may have a hard time getting approved for years. That’s not to say you can’t work to improve your credit—it just may take more work.

For what it’s worth, lenders don’t only check credit. They might also care about other factors, such as your debt-to-income ratio and employment status. Having a steady job and an income shows that you can reliably pay your bills.

Here are some other items that could potentially cause a rejection: 

1. Missed or late payments

Lenders can report missed or late payments to the credit bureaus 30 days after the first payment deadline. These can reduce your credit score and stay on your credit report for up to seven years.

What you can do about it: The first step is to examine your report and make sure all the missed or late payments are entirely accurate.

If even a tiny detail, such as the amount, date or lender’s name, is wrong, you can dispute the negative item. 

The next step is to do whatever you can to make sure you never miss another payment: schedule reminders, set up auto-payments—whatever you can. Your payment history makes up 35 percent of your credit score, so building up a good record is key. 

2. Several hard inquiries

If you’ve ever shopped around for a car or a new credit card, you may have racked up several hard inquiries in a short time. Hard inquiries stay on your credit report for up to two years, but stop impacting your credit after a few months to a year.

Multiple hard inquiries in a brief period can make it seem like you were desperate for credit or were being rejected by many lenders. 

What you can do about it: The most important thing you can do is wait this period out. You should see your credit score bounce back after a few months. While you wait, don’t apply for any new credit so your credit score doesn’t drop further.

A rule to try to stick to in the future is to only allow for a hard inquiry once every six months—at most. 

3. High credit utilization ratio

Your credit utilization ratio is the second most important factor, accounting for 30 percent of your credit score. Credit utilization is the amount of credit available to you versus the amount you use every month.

Generally speaking, a credit utilization ratio above 30 percent will negatively impact your credit score. So, if you have two credit cards with a credit limit of $5,000 each and you spend, on average, $3,100 per month on the cards, your credit utilization will be high at 31 percent.

Note that it doesn’t matter if you pay off the credit in full every month. Credit utilization exclusively looks at what you use, even if you pay it off. 

A high credit utilization ratio makes you look much riskier to future lenders. Using too much credit can imply you’re living beyond your means or can’t control your spending. 

What you can do about it: You can get your credit utilization down in a few ways. The first is to try to spend less on your credit cards, if you can.

The second is to increase the credit available to you. If you can open a new credit card or increase your current limits, your utilization will decrease.

For example, in the above example, let’s say one of the cards was to rise to a limit of $6,000. Spending $3,100 out of $11,000 now puts you at a healthier credit utilization of 28 percent. 

4. Insufficient credit history

The longer your credit history, the better lenders can understand your borrowing habits. If you have a thin credit profile—maybe you just turned 18—it can take time to build up a credit history. Unfortunately, until that happens, your thin credit profile can work against you. 

What you can do about it: One of the most critical rules in building up your credit history is to leave your oldest credit cards open. Even if you don’t use the card, leave the account open. Your credit history only goes back to your oldest account. 

Don’t worry—as time goes on, your credit history will build up.

Increase your chances of getting approved

You can also increase your chances of getting approved for a new credit card by:

• Securing a preapproval first. Many lenders offer a preapproval based on a soft inquiry into your credit. They’ll look into your credit and give you preapproval for the credit card. Ultimately, preapprovals aren’t guaranteed, but they’re often a good indicator of whether you can get the credit card. If you find out you’re not preapproved, you can save yourself from applying and getting a hard inquiry on your credit report. 
• Research what cards you’re more likely to be approved for. There are many types of credit cards out there. It’s essential to be honest with yourself and understand that you might not qualify for top-tier credit cards if you have poor credit. Instead, look for credit cards that have lower requirements. You can work on improving your credit in the meantime and eventually work your way up to better credit cards. 
• Check your credit score and reports regularly. It’s important to check your credit score and reports often. You can watch your credit improve and know when you have a better chance of credit approval. Additionally, you can monitor your credit report and dispute any incorrect items that show up on your report. 

Improving your credit can take time, but it’s worth it. As you work to build your credit, you’ll learn many healthy financial habits that will help you in the future.

If you need help with credit repair and don’t know where to start, you can consider professional services. The credit advisors at CreditRepair.com can help you evaluate your credit reports, dispute any false negative items and keep your credit as accurate as possible.

Reviewed by Leikeisha Finai-Jones, Credit Consultant at CreditRepair.com.

Leikeisha Finai-Jones joined CreditRepair.com back in 2020 as a social community coordinator. Leikeisha knows how the credit industry works and how what pitfalls consumers need to look out for—Leikeisha mastered the skill of problem-solving even in tough situations involving identity theft, credit repair and other issues. Leikeisha has seen it all, and knows how consumers can make the most of their rights to boost and protect their credit.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

The post Does getting rejected for a credit card affect your credit score? appeared first on CreditRepair.com.

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