Do You Need a Good Credit Score to Adopt a Child?

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Your financial situation is one of many factors adoption agencies consider when you apply to adopt a child. But what are they looking for, exactly? Do you need a certain income, amount of savings or credit score to become an adoptive parent? Adoption agencies won't necessarily check your credit before you adopt a child, but they will want to see that you can manage your money. Read on to find out what adoption agencies look for when reviewing your finances.

How Does Your Credit Affect Adopting a Child?

Before approving you as a suitable adoptive parent, both private and public adoption agencies will want evidence that you have the financial resources to provide for a child. While you don't have to be wealthy, you do need to demonstrate a stable income and the ability to manage money. Generally, agencies require your income to at least be more than the federal poverty level.

The agency will conduct a home study to assess your suitability as a parent. You'll typically be asked for pay stubs, W-2 forms or income tax returns to verify your income. The agency may also review your monthly expenses or bank statements, and may ask about life and health insurance; your savings and investments; and your debts.

Some adoption agencies may check your credit score as part of the home study, but federal law does not require it. Even if the agency doesn't check your credit, however, your credit score could be a factor if you plan to apply for a loan to help pay for the cost of adoption.

What Are the Costs of Adopting a Child?

The cost of adoption can vary widely, depending on what type of adoption you're considering. Adopting a child from the foster care system may be free or cost a few thousand dollars at most, because the government typically covers the costs. At the other end of the cost spectrum, international adoptions can cost as much as $60,000.

To budget for adoption expenses, consider your financial resources and your options. If you don't have enough savings to pay the costs, other sources of financial assistance include:

  • Your employer: Some employers offer financial assistance with adoption costs. Active-duty members of the military can receive up to $2,000 per child in reimbursement.
  • Grants: A wide variety of organizations offer grants to help parents adopt. The U.S. Department of Health and Human Services maintains a list of grants and other resources.
  • Loans: You can get a personal loan, home equity loan or home equity line of credit to cover the one-time costs of adoption. Having good credit can make it easier to qualify for these loans and get better loan terms. Only borrow money to adopt a child if you're confident you can pay it back—it's best to avoid starting off your journey as a parent with burdensome debt.
  • Tax credits: Adoptive parents can receive a federal tax credit of up to $14,440 per child for the year in which the adoption is finalized. This tax credit is nonrefundable, however, which can limit its helpfulness.
  • Friends and family: Donations or loans from friends, family, your house of worship or other organizations you belong to could help you cover adoption costs.

You can also lower the cost of adoption by working with a sliding scale adoption agency that adjusts its fees based on your income.

If paying for a private adoption would be a major financial stretch, think about adopting a child in foster care instead. While these children are typically not infants, you'll have plenty of financial and other resources to lean on as you adapt to parenthood. Most states offer training for adoptive parents, as well as subsidies that assist with medical coverage, payment for adoption costs and a monthly stipend for the child's living expenses.

How to Improve Your Finances to Prepare for Adopting a Child

It costs nearly $15,000 a year to raise a child, according to the U.S. Department of Agriculture, so even if your credit isn't a factor in adoption, financial stability is. Prepare for the new addition to your family member by reviewing your budget. Add up your current monthly income and expenses. Then list the new expenses involved with adoption, from one-time costs such as agency fees to ongoing expenses such as diapers, clothing and child care.

Remember, your income may change temporarily while you take time off from work to adjust to parenthood. Check with your employer and review state laws regarding family and medical leave to see if you're entitled to any paid leave. If you or your partner plan to be a full-time stay-at-home parent, your income will change permanently.

For those new to budgeting, the 50/30/20 method is a simple way to start. This approach allocates 50% of your net income to necessities, 30% to discretionary spending and 20% to savings. You can also budget using multiple bank accounts—for example, one checking account for necessities, one for discretionary spending and a savings account for your emergency fund. Experienced, detail-oriented budgeters may want to try zero-based budgeting. This method accounts for every single dollar to ensure you have a plan for your income and spending.

Creating a budget and reducing your expenses can help you pay down high-interest debt, leaving more money for child-related expenses. Paying off high-interest debt with a debt consolidation loan could save you money on interest; making the loan payments on time can even help improve your credit score. If you have good credit, you may qualify for a balance transfer credit card to help you pay down credit card debt. Make sure to pay off the new card's balance before it starts accruing interest and avoid racking up debt again.

Your credit score may not affect your ability to adopt a child, but good credit can make it easier to achieve other goals for your growing family, such as buying a home. As you embark on parenthood, check your credit report and credit score to make sure your family finances are off to a good start.

How Good Is Your Credit Score?

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