Understanding Credit and Debt for Individuals With an Intellectual or Developmental Disability
Financial independence can be difficult to achieve for the more than 6 million people in the United States who have intellectual or developmental disabilities (IDDs), according to Disability Justice. People with developmental disabilities may have less access to banking products or may lack an understanding of credit and debt.
Despite the difficulties, people with IDDs can build their money management skills. There are available resources and strategies for guarding against fraud, accessing credit, and improving financial literacy and empowerment.
Identifying and Addressing Common Credit Vulnerabilities
People with intellectual and developmental disabilities may have difficulty establishing good credit due to low income or unemployment. Many face discrimination that keeps them from accessing credit lines, such as bank loans. Some people with IDDs also lack financial literacy or the experience to make sound spending decisions. As a result, they may be at greater risk for having higher levels of debt.
Credit Card Scams and Fraud
Anyone can fall victim to credit card scams and fraud, but people with IDDs may be especially susceptible. Scammers may take advantage of isolation, limited financial literacy, or cognitive impediments. From caregivers who may capitalize on their role as trusted helpers to strangers impersonating government agencies, there are many types of credit card fraud to avoid.
- Type of FraudExamples
- Financial abuse from a family member or caregiverA trusted source may pressure a person with an IDD to give them money or grant them power of attorney to take control of their finances or property.
- PhishingUsing phone or email, scammers may impersonate companies or agencies to get credit card information or personal details from their victim. People with IDDs should watch out for calls from unrecognizable numbers and verify any request for personal information.
- Identity theftWith social security numbers and other personal information, scammers can open new credit cards in a victim’s name.
- Account takeoverIf scammers can steal or convince people to share their credit card or online banking credentials, they can change passwords and lock out the actual account holder.
- Interest rate reduction schemesIn these scams, callers promise to facilitate lower credit card interest rates for a fee but do not deliver. Worse, they may also steal credit card information.
- Charity scamsScammers posing as nonprofit organizations may ask for donations via credit card but then use the credit card information for other, non-charitable purposes.
- Debt scamsPeople posing as debt collectors may try to get victims to pay debts they don’t owe. Fake debt settlement firms may try to access personal information or charge fees for services they don’t provide. Credit repair scams involve charging fees for services anyone can do for themselves.
Access to Financial Products With Low to No Credit
Good credit is key to getting college loans, car leases, mortgages, rental apartments, and even jobs or cell phone contracts. But 31% of people with disabilities report having bad credit. People with low or no credit often can’t get financial products that make it easier to absorb unexpected or large expenses. If they do get credit, they typically pay higher interest rates.
- Difficulties establishing credit history: Building good credit takes time and requires that you make timely payments on a credit card or loan. But if you can’t get a credit card or a loan because you don’t have sufficient income or assets, it can be hard to build a credit history.
- Less access to loans: People with disabilities are approximately half as likely as people without disabilities to have a student loan. They’re also more likely than people without disabilities to feel discouraged from applying because they assume they will be denied.
- Greater likelihood of being unbanked: People with disabilities are three times more likely than people without disabilities to be unbanked, which means they don’t have a checking or savings account. Being unbanked can mean that someone has insufficient resources to warrant a bank account or it can suggest barriers to economic inclusion.
- Reliance on alternative financial services: According to the Federal Deposit Insurance Corporation (FDIC), one-third of people with disabilities use alternative financial services such as payday loans or prepaid cards. These tools can be costly and damaging to credit scores.
How to Establish or Improve Credit Scores
A good credit score, or any credit score at all, requires a credit history. To build good credit, you must consistently make on-time payments and demonstrate that you can manage debt responsibly. Building or improving your credit score without a credit history can be tricky, but there are ways to start establishing creditworthiness.
Open a credit card
If you can get a credit card, do it. Unsecured credit cards are the most common types of credit cards and don’t quite require any form of collateral. Secured credit cards require a security deposit, which may be more challenging for people with limited resources.
Pay credit card bills on time and in full
Once you qualify for a credit card, use it for small purchases and pay off bills on time each month. Showing lenders that you can handle debt responsibly will help you access more and better credit options in the future.
Apply for a loan
Getting a loan can help establish a credit history. If you don’t qualify for a loan on your own, a parent or guardian with good credit can co-sign. Most importantly, make payments on time, as payment history is an important factor in how lenders view your creditworthiness.
Lower your credit utilization
Credit utilization is a measure of how much of your available credit you use. For example, if you carry a credit card balance close to the credit limit, you’ll have a high credit utilization. But if you can pay off or pay down your balances, your utilization will decrease. To card issuers and lenders, lower utilization is better.
Upgrade your credit
As you build and improve your credit history, you’ll have more and better credit options. Upgrade credit cards or loans when you are offered favorable terms. Responsibly managing credit creates a virtuous cycle and will allow you to continue to access better credit products.
Understand Money Habits That Could Lead to Debt
Understanding how to manage money responsibly can prevent bad habits, like taking on too much debt or failing to make payments on time. Those bad habits can leave you with few options other than costly payday loans or unregulated financial services.
- Making minimum payments: Making at least the minimum payment is essential to maintaining or building good credit. But making the minimum payment leaves you with credit card balances. You pay interest rates on the balance, which makes all your purchases effectively more expensive. Lenders look at overall credit utilization, so keeping balances low is important to getting approved for future credit.
- Not making a budget: A budget is a way to plan ahead and set limits on spending based on your income. Without a budget, it may be hard to know what you can afford to spend and when you can get into trouble by overspending.
- Impulse spending or adding to current debt: If you spend more than you have, you can get into financial trouble. If you’re already in debt, making a big purchase can dig you deeper into the hole.
- Maxing out credit card balances: Overall credit utilization, which is the amount of credit you use compared to how much credit you have, should be as low as possible. Maxing out credit cards makes your utilization high, which can hurt your credit score.
- Missing loan or credit card payments: Lenders look for reliable borrowers and missing payments make it harder to get approved for credit in the future.
- Ignoring your credit score: Your credit score can make the difference between being able to get a job, an apartment or a cell phone contract, let alone a loan or credit card with favorable terms. But credit bureaus don’t always have accurate information. Not checking credit reports can allow mistakes to linger.
How to Establish Better Money Habits
People with IDDs may need help learning sound money management strategies and staying on track. Even if a mistake has been made in the past, it is never too late to learn how to improve your financial situation.
Learn the basics of money
People with IDDs may not understand or have experience with financial concepts. Enrolling in an educational program and becoming more familiar with financial literacy tools can help someone understand how to manage basic finances.
Make a budget
It may be tedious or difficult, but mapping out your income and expenses can give you a better understanding of your spending habits.
Keep track of payment deadlines
On-time payments are important for building or improving credit scores. Set calendar reminders to keep you on track. If you miss a deadline, make your payment as soon as possible since interest and fees can increase with the passage of time.
Some lenders are more flexible than others. Credit cards typically have the highest interest rates, so paying credit card bills first may help avoid costly late fees.
Don’t wait to save
It may never be easier to set money aside so start now. Even saving a small amount every month in an interest-bearing account can help you establish a financial cushion.
How Parents and Guardians Can Help
Financial empowerment can seem elusive for some people with IDDs, but many can achieve a level of financial competence and independence with the support of others.
Be an Ally or Advocate
Parents, guardians, caregivers, and other trusted allies can help people with IDDs develop financial literacy and gain greater financial independence. Being an ally to someone with an IDD may also involve advocating for them and helping them avoid being taken advantage of.
- Assess capabilities: People with developmental disabilities have differing degrees of cognitive ability, which may affect their capacity to manage finances. Allies should objectively and realistically assess each individual’s capabilities to understand what aspects of financial management the person with a disability can handle.
- Don’t overstep: It may be tempting for family members or caregivers to take charge of financial matters for a person with an intellectual disability, especially if they’re helping manage other aspects of the person’s life. But that may not be necessary or ultimately beneficial. Allies should discuss how to be helpful, rather than intrusive.
- Create limitations: People with IDDs may benefit from spending limits on credit cards or prepaid cards which prevent overspending. Alternatively, people with disabilities can become authorized users on a caregiver’s credit card or bank account. This approach can give the family member or caregiver greater visibility and control over someone’s finances, although it can also make the caregiver liable if something goes wrong.
- Build independence: Helping people learn the basics of financial management can be a way to foster greater independence in other spheres of life.
Take Protective Measures
People with IDDs may be at greater risk of being financially exploited or abused. Setting up protections for a person with an IDD can help them to build money management skills while staying safe.
Get credit monitoring
Establish credit monitoring through one of the credit bureaus or a reputable credit monitoring service to watch out for fraud or unexpected activity. Some services may charge a fee. Everyone is entitled to check their credit reports once a year for free. Also, monitor your bank and credit card statements to catch any unauthorized activity. If you see anything suspicious, report it immediately.
Consider a credit freeze
Freezing someone’s credit will prevent fraudulent or impulsive account openings, though it also prevents them from opening any new credit cards or accounts they may actually need to build their credit.
Get fewer credit card offers
Opt-out from unsolicited credit card offers online through a joint initiative by the major consumer credit reporting companies, OptOutPrescreen.com. Not all card issuers will be on this list, so you may need to contact the Data and Marketing Association to opt-out of general unsolicited mail or phone offers.
Proceed with caution
Never give out personal information or credit card or bank account details. If you get a request for information or funds from any organization, company, or government agency — even ones you interact with regularly — double check the request is legitimate.
Keep a strong security stance
Set up two-factor authentication on any financial accounts to prevent hackers from getting in. Avoid accessing the Internet from a public access point where hackers may have easier access to your information.
Teach Financial Literacy With Realistic Expectations
Complex financial education for people with IDDs may be unrealistic, but tailoring lessons to an individual’s abilities can help build a foundation of financial literacy. Basic lessons such as how to find a price tag, write a check, or review the balance on a prepaid credit card can be a start.
Establish Guardianships and Power of Attorney
Adults with developmental disabilities may not be able to make decisions for themselves, in which case parents or another trusted adult should establish guardianship or conservatorship. The process varies by state, but generally involves petitioning a court to appoint a guardian.
Guardianship can substantially limit a person’s autonomy. For people with less severe disabilities who may need or want help managing their financial decisions, a power of attorney may be more appropriate. Establishing a power of attorney involves engaging a lawyer or an online legal service and signing a legal document. The person appointing the power of attorney must be 18 years or older and legally competent.
Use Local Organizations for Support
Organizations can help parents, guardians, and caregivers to support their loved ones. Many national IDD organizations have a network of local partners.
- FDIC Money Smart Alliance: The FDIC lists nearly 1,300 local organizations that deliver its Money Smart financial education curriculum or train others to teach it. Alliance members include federally insured financial institutions, nonprofit organizations, schools, and local, state, and federal agencies.
- State Consumer Protection Agencies: Every state has a Consumer Protection Office that fields complaints and investigates violations of consumer laws. Protection agencies typically provide educational materials and advocate for consumer rights in a range of sectors.
- The Arc: The Arc is a national community-based organization that advocates for and serves people with intellectual and developmental disabilities and their families. The Arc works with 700 state and local chapters nationwide.
- Autism NOW: Operated by The Arc and funded by the Administration on Intellectual and Developmental Disabilities, Autism NOW is a national resource center for people with Autism Spectrum Disorders (ASD) and other developmental disabilities. Autism NOW publishes an extensive list of resources in every state for people with IDDs.
Consumer Protection and Rights
Several important laws protect the rights of people with intellectual and developmental disabilities:
- The Rehabilitation Act of 1973 protects people with disabilities against discrimination in federally funded programs, including universities.
- The Americans with Disabilities Act (ADA) of 1990 prohibits discrimination in employment, state-funded programs, public transportation and other public spheres on the basis of disability.
- The Developmental Disabilities Assistance and Bill of Rights Act (DD Act) of 2000 was designed to ensure people with developmental disabilities can get individualized and community services.
Laws also require someone to have a certain mental capacity to enter into a contract, including credit card agreements. Due to those stipulations, someone who enters into a credit or loan agreement without such a capacity may be protected from creditors. Government income, such as Social Security disability benefits, which many people with IDDs get, is also protected from creditors and debt collectors.
Debt Management, Relief Options and Exemptions
When people get into trouble with debt, it can feel like there’s no way out. Sometimes creditors will negotiate a payment plan, but there are also other options to cope and manage debt.
- Credit counseling can help people in debt understand financial management and make a plan to get out of debt.
- Debt management programs typically require the borrower to deposit money with a credit counseling organization.
- Debt settlement programs usually negotiate with creditors on behalf of the borrower to lower the total amount of debt. The remaining debt can usually be paid in monthly installments to the debt settlement company.
Check with your state attorney general or local consumer protection agency to make sure any assistance program you choose is reputable.
- Federal Trade Commission (FTC): The FTC offers helpful consumer information about credit counseling and debt relief programs. The information is a good way to understand debt management options and learn how to find a trustworthy service.
- Consumer Education Services Inc. (CESI): CESI is a nonprofit organization dedicated to helping people live debt-free. Though not specifically focused on consumers with developmental disabilities, CESI offers credit counseling, bankruptcy counseling, debt relief support, and financial education.
Expert Insight on Financial Literacy for People With IDD
- Data suggests that people with developmental disabilities are more likely to be economically disadvantaged. What are the most important or relevant indicators of economic health or independence in this population?
- What policies, programs, strategies, or individual actions can improve the economic health and independence of people with developmental disabilities?
Research Manager at the University of Minnesota
Director of Adult Services at Autism Speaks
Associate Data Scientist at Autism Speaks
Financial Empowerment Resources
Many advocacy and support organizations are available to help increase financial empowerment among people with developmental disabilities.
- National Disability Institute: The National Disability Institute is dedicated to improving financial wellness for people with disabilities. It offers financial education resources and provides counseling.
- National Association of Councils on Developmental Disabilities: The NACDD is an association of 56 Councils on Developmental Disabilities across the U.S. Its financial literacy initiative is a collaborative effort across member councils and other organizations to support financial independence for people with developmental disabilities.
- Consumer Financial Protection Bureau (CFPB): The CFPB is a federal agency that enforces consumer finance rules and empowers consumers to take control of their economic lives. Consumers who have trouble with a financial product or service can file a complaint with the CFPB, which will investigate and try to resolve the issue.
- Autistic Self-Advocacy Network: The Autistic Self-Advocacy Network (ASAN) is a national, nonprofit grassroots disability rights organization run by and for autistic people. Its resources include the Roadmap to Transition: A Handbook for Autistic Youth Transitioning to Adulthood, which offers young people information about important financial matters such as employment and health insurance.
- U.S. Department of Labor Office of Disability Employment Policy: The U.S. Department of Labor Office of Disability Employment works with other federal agencies to strengthen financial education, and it lists tax incentives and programs to help people with disabilities.
- FDIC Money Smart Program: From the Federal Deposit Insurance Corporation (FDIC), Money Smart is a financial education program that teaches financial skills to people at various ages and stages and shows people how to use banking services, create financial stability and build financial confidence.
- ABLE National Resource Center: ABLE accounts are tax-advantaged savings accounts for people with disabilities and their families to save money for qualified disability expenses. The ABLE National Resource Center (ABLE NRC) is a nonprofit organization focused on providing information and guidance on ABLE accounts.
- National Council on Disability (NCD): NCD is a federal agency responsible for advising the president, Congress and other federal agencies on disability policy, programs, and practices. NCD convenes stakeholders, analyzes data, identifies solutions, and provides tools to advance policies and programs that support people with disabilities. NCD publishes financial assistance resources, including publications about the economic rights of people with disabilities, federal policies to counteract disincentives to work and strategies to expand employment and economic self-sufficiency among people with disabilities.
About the Author
- Cornell Law School Legal Information Institute. "42 U.S. Code § 15002 – Definitions." Accessed May 3, 2021.
- Federal Deposit Insurance Corporation. "2017 FDIC National Survey of Unbanked and Underbanked Households." Accessed May 3, 2021.
- FINRA Investor Education Foundation and National Disability Institute. "Access to Credit for Adults with Disabilities." Accessed May 3, 2021.
- Medisked and The Arc. "Disability Data Digest 2018." Accessed May 3, 2021.
- National Disability Institute. "Financial Capability of Adults with Disabilities." Accessed May 3, 2021.