Does government assistance affect your credit?

Disclosure regarding our editorial content standards.

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! 

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.