Building credit might feel like a luxury when you're living on a fixed disability income, but good credit can actually save you money and open doors that make life easier. Whether you're hoping to rent an apartment, get a car loan, or simply have options in an emergency, your credit score matters. The good news is that you can build credit safely while protecting your benefits.
In this article, we'll cover:
- Why credit matters when you're on disability benefits
- How to check your credit score without hurting it
- Secured credit cards as a starting point
- Credit-builder loans and how they work
- Strategies for building credit without going into debt
- Common mistakes to avoid when you're on a fixed income
Why Credit Matters on Disability
You might wonder why you need credit when you're living on SSI or SSDI. After all, you're not planning to take out a big loan. But credit affects more than borrowing—it can impact your ability to rent an apartment, get utilities without a large deposit, and even get approved for a cell phone plan.
Landlords often check credit scores before approving rental applications. A low score or no credit history can mean getting turned down for housing or being asked to pay several months' rent upfront. Utility companies may require deposits of $200 or more from customers with poor credit. Even insurance companies sometimes use credit information to set rates.
Building good credit doesn't mean going into debt. It means establishing a history of responsible financial behavior that others can see and trust.
Start by Checking Your Credit
Before you can build credit, you need to know where you stand. You're entitled to one free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) every year through AnnualCreditReport.com. Checking your own credit report does not hurt your score.
Review your reports for errors, which are surprisingly common. Look for accounts you don't recognize, incorrect balances, or negative marks that shouldn't be there. If you find errors, you can dispute them directly with the credit bureau.
If you have no credit history at all, your report may come back empty or say you have a "thin file." That's actually a decent starting point—it means you have a clean slate to build from.
Secured Credit Cards: The Best Starting Point
For most people on disability, a secured credit card is the safest way to start building credit. Unlike a regular credit card, a secured card requires a refundable security deposit—usually $200 to $500—which becomes your credit limit.
Here's how it works: you deposit $200 with the card issuer. You then have a credit card with a $200 limit. You use it for small purchases and pay the balance in full each month. The card issuer reports your payment history to the credit bureaus, building your credit score over time.
The deposit protects the card company (and you) from getting into debt you can't repay. After 6-12 months of responsible use, many issuers will upgrade you to an unsecured card and return your deposit.
Important for SSI recipients: Your security deposit counts as a resource, but once you've deposited it and received the card, that money is no longer accessible to you, so some people argue it shouldn't count. However, Social Security's rules on this aren't entirely clear. To be safe, factor the deposit into your resource calculations or keep your other savings lower to compensate.
Credit-Builder Loans
Credit-builder loans work differently than traditional loans. Instead of receiving money upfront, your "loan" payments go into a savings account. Once you've made all the payments, you receive the money you've saved, minus interest and fees.
For example, you might take out a $500 credit-builder loan with 12 monthly payments of about $45. Each payment gets reported to the credit bureaus as an on-time loan payment. At the end of the year, you get roughly $500 back (minus fees), and you've built 12 months of positive payment history.
Credit unions often offer credit-builder loans with low fees. Some online services like Self also offer this product. Monthly payments can be as low as $25, making this accessible on a disability income.
Using a Credit Card Without Going Into Debt
The key to building credit without financial risk is treating your credit card like a debit card. Only charge what you can pay off in full when the bill comes. Never carry a balance from month to month.
A simple approach is to put one small recurring expense on your secured card—like a streaming subscription or your phone bill—and set up autopay to pay the full balance each month. You'll build credit without having to think about it, and you'll never pay interest.
Keep your credit utilization low, meaning don't use more than about 30% of your available credit. On a $200 limit card, that means keeping your balance under $60 at any given time. Lower utilization generally means a higher credit score.
Become an Authorized User
If you have a trusted family member or friend with good credit, you might ask them to add you as an authorized user on one of their credit cards. Their positive payment history on that account can appear on your credit report, giving your score a boost.
You don't actually have to use the card—or even have it in your possession—to benefit. Just being listed as an authorized user can help, as long as the primary cardholder continues making on-time payments and keeping their balance reasonable.
Mistakes to Avoid
Don't apply for multiple credit cards at once. Each application creates a "hard inquiry" on your credit report, which can temporarily lower your score. Space out applications by at least six months.
Never miss a payment. Payment history is the single biggest factor in your credit score. Even one late payment can cause significant damage. Set up autopay or calendar reminders to stay on track.
Avoid high-interest debt. Building credit shouldn't mean paying expensive interest charges. If you can't pay your balance in full, you're spending money you don't have.
Don't close old accounts. The length of your credit history matters. Even if you get a new card, keep your oldest account open (unless it has an annual fee you can't justify).
Watch out for scams. Some companies prey on people with poor credit, offering expensive "credit repair" services that don't work. You can build credit yourself for little or no cost using the methods described above.
Building Credit Takes Time
There's no overnight fix for credit. Plan on at least six months to a year of consistent, responsible behavior before you see meaningful improvement in your score. That's okay—you're building a foundation that will serve you for years to come.
Check your credit score periodically (many banks and credit cards now offer free score monitoring) to track your progress. Celebrate the milestones along the way, and remember that every on-time payment is a step toward greater financial security.
Managing your finances on disability benefits takes extra care. Purple offers a checking account built specifically for people on SSI and SSDI, with tools to help you track your spending and stay within your benefit limits.