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Credit for 5 Year Olds, Yes. For Stay At Home Moms, No.

Credit for 5 Year Olds, Yes.  For Stay At Home Moms, No.

The credit industry is tightening up their policies in the wake of the great recession, limiting the amount of risk that they open themselves up to by giving out more credit than people can actually pay.

At least, that is the argument behind a new policy based on federal rules that may change how household income is determined and could result in leaving stay at home parents without credit — disproportionately women.

Via WHEC News in Rochester:

Stay-at-home parents may no longer be allowed to get their own credit card.

That’s because new federal rules that say banks will no longer be able to give credit cards to people who can’t prove an individual source of income.

The new rules are meant to keep credit cards out of the hands of people who can’t afford it, but they could negatively impact stay-at-home parents, and people who have a spouse in the military. They could also mean that if a couple gets divorced, the stay-at-home parent would have no credit history.

A lack of credit history after a divorce could have a devastating effect on women as well, as women often become the custodial parent.  Credit history is used for everything from renting apartments to entry level jobs.  And, of course, credit history is used for…getting credit.

The credit card industry is already benefiting from rules that would allow them to continue to collect unpaid debt even after a bankruptcy, a move many project will hurt women who will see their ex’s have to pay the companies first and the child support with whatever is left.  Should credit be unattainable without a separate source of income, some spouses who stay at home may find themselves without home, income, financial support and now any way to establish any of these things.

Does the credit industry need to reign in its lending practices?  Yes, surely, but first it needs to look at ridiculous policies that it has in place for granting cards first, such as the ones that allowed this 5 year old to get his own card while his parents were simply trying to end the onslaught of offers he was receiving.  Targeted, reasonable credit granting is possible — and if the companies could put those policies in place, the government wouldn’t have to institute additional rules reign them in.

 

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Photo by Lotus Head from Johannesburg, Gauteng, South Africa (sxc.hu) [GFDL (www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0 (www.creativecommons.org/licenses/by-sa/3.0/) or CC-BY-SA-2.5-2.0-1.0 (www.creativecommons.org/licenses/by-sa/2.5-2.0-1.0)], via Wikimedia Commons

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61 comments

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6:23AM PDT on Jul 31, 2011

Not a good policy at all.

12:32PM PDT on Jul 7, 2011

Shows how business thinks.

12:29AM PDT on May 18, 2011

I personally don't believe in credit. Credit has a tendency to get people into debt. I prefer to pay with with cash (as far as I can), and only have credit if I know I can pay it off, or if I can afford it. But then again, why have credit if you can afford to buy everything with cash? I can understand credit for houses and cars, but maybe something like that should be done with debit order or debit card instead of with a credit card (and credit history), and of course maybe six months bank statement. But then again, that's just my personal opinion. : )

1:15PM PDT on May 14, 2011

This system has many failures and few wanting to put an end to practices that continue make no sense. While I can understand having reservations about loaning money to no one with any income, the banks and the access they have bought over the years to politicians, has culminated in policies very advantageous to them at the expense of everyone else.
There is always this recurring theme of the haves taking advantage. It is getting really old.

11:55AM PDT on May 13, 2011

ok this is weird

1:09AM PDT on May 13, 2011

I'd have to agree that a 5 year old normally CAN'T get credit because they're too young to be in a binding contract. If so, the person getting credit for the kid is actually stealing the identity of said child.

As for the credit cards for adults, it should go by household income, not who actually earns the money. Why, a mother who takes care of her children, cooks, cleans, gives rides, does first aid, keeps house, pays the bills, helps with homework, volunteers for PTA, signs up for scouts, etc... That's not responsible enough because she has no outside income? Please, moms are home executives, and the example of multitasking queen!

Of course if the household is a one card family, it should be shared between the husband and wife. Then again, I live off of my bank card. What I have in the bank is what I can spend. Nothing more.

It feels good not to be in debt, and knowing that everything I have, no matter how meager, is all mine.

3:03AM PDT on May 8, 2011

Most don't seem to be going to the link about the 5-year-old boy - the mother clearly states the credit card company had received a "fake birth date" for the child, which is why they issued the card.

3:00AM PDT on May 8, 2011

Petra you ask how a five-year-old gets credit. He gets it through a mistake - credit card companies don't deliberately choose to give out credit cards to five-year-olds, who not only have no income but can't even legally enter into that kind of contract to begin with.

2:24AM PDT on May 8, 2011

How does a five year old get credit, while a full grown woman who takes care of the bills, runs her children around, checks in on the elderly parents, plus run a household can't get it?

6:30AM PDT on May 7, 2011

And the article states, "The credit card industry is already benefiting from rules that would allow them to continue to collect unpaid debt even after a bankruptcy, a move many project will hurt women who will see their ex's have to pay the companies first and the child support with whatever is left."

But Bankruptcy law gives priority to child support and alimony:

"Bankruptcy laws provide a system of re-payment priority for people and companies that are owed money (called "creditors"). Under the new bankruptcy law, among the changes in creditor priority is that people who are owed unpaid child support and alimony take priority over any other creditor."

http://bankruptcy.findlaw.com/new-bankruptcy-law/new-bankruptcy-law-basics/key-changes.html

Credit card debt, like any other debt, could be discharged under Chapter 7; however, if the debtor's income is above the median income for his/her state, then the bankruptcy has to be filed under Chapter 13 and a repayment plan made to pay creditors.

At least in Alabama, debt isn't taken into account when calculating child support (the father's gross monthly income is what is used and usually the only things that would reduce that figure would be his payment of child support/alimony to anyone else under court order, his payment of the child's health insurance coverage or daycare expense.

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