Do you recall the excitement you felt when you filled out all those little boxes and imagined the day your brand-new, shiny credit card with your name on it would arrive in the mail when you applied for your first credit card?
Yes, you most likely also recall being a little perplexed when you saw the questions regarding your yearly income if you had previously applied.
Perhaps you haven’t applied for credit yet because you’re still in school and only making minimum wage, or maybe you haven’t found a job yet. How do you answer questions about income if you don’t have much yet … or any?.
It’s likely that you have questions like, “Can I lie about income on a credit card application?” or “What is a good annual income to declare to get a credit card?” (spoiler alert: Not ever recommended!)
Credit card veterans may feel they could have done better with those applications and may still have questions. Alternatively, if you’re a novice in the waiting phase, you might be unsure of how to apply for a card. Maybe it’s even holding you back from applying.
Well, we have some ideas about what to do if either scenario sounds like you. Continue reading to learn how to discuss your income on credit card applications even if it’s meager or lurking around the corner.
When applying for a credit card, you’re asked to provide a variety of personal information, including your income. But what happens if you lie about your income on a credit card application? Can credit card companies tell?
The short answer is: yes, they can. Credit card companies have access to a variety of tools that can help them verify your income, including your credit report, tax returns, and employment records. And if they catch you lying, you could be in big trouble.
How Do Credit Card Companies Verify Income?
Credit card companies typically verify income in one of two ways:
- Soft inquiry: A soft inquiry is a type of credit check that doesn’t affect your credit score. Credit card companies can use soft inquiries to verify your income by checking your credit report for information such as your employment history and income.
- Hard inquiry: A hard inquiry is a type of credit check that does affect your credit score. Credit card companies can use hard inquiries to verify your income by contacting your employer or requesting tax transcripts from the IRS.
What Happens If You Lie About Your Income?
There are several repercussions that could occur from lying about your income on a credit card application. These include:
- Denial of your application: If the credit card company catches you lying about your income, they may deny your application for a credit card.
- Higher interest rate: If you’re approved for a credit card but the credit card company finds out that you lied about your income, they may charge you a higher interest rate.
- Closure of your account: If you’re caught lying about your income after you’ve already been approved for a credit card, the credit card company may close your account.
- Legal action: In some cases, lying about your income on a credit card application could be considered fraud, which could lead to legal action.
What Should You Do Instead of Lying?
If you’re worried about not qualifying for a credit card because of your income, there are a few things you can do instead of lying:
- Apply for a secured credit card: Secured credit cards are easier to get for people with low income or bad credit because they require you to put down a security deposit as collateral.
- Become an authorized user on someone else’s credit card: When a loved one or someone you trust adds you as an authorized user to their credit card, you’re able to use their account to make purchases.
- Improve your credit score: The higher your credit score, the more likely you are to be approved for a credit card with a low interest rate. You can improve your credit score by paying your bills on time, keeping your credit utilization low, and avoiding opening new credit accounts.
The Bottom Line
Lying about your income on a credit card application is a risky proposition. If you’re caught, you could face a number of serious consequences. Rather than telling lies, think about getting a secured credit card, adding yourself as an authorized user on someone else’s credit card, or raising your credit score.
What Types of Income Can You Include on a Credit Card Application?
You can include several types of income. A higher income will generally help your approval odds and allow for higher credit limits. Let’s take a closer look at what that means.
Any sources of income that you have a “reasonable expectation of access to” are eligible to be counted if you are over 21. ” We’ve listed a few you can count:
- Part-time or full-time income
- Alimony or child support
- Gifts or trust fund payouts
- Social Security payments or pensions
- Retirement fund payments
- Investment income
In 2012, the Consumer Financial Protection Bureau (CFPB) amended the definition of “household income” to include the income of a partner or spouse if you live together.
If you’re under 21, you can only count “personal income” from your job, scholarships, or grants. You can’t include your parents’ income unless they cosign for the credit card (which is usually not recommended).
Additionally, since student loans are a different type of debt and typically do not count as income, we do not advise including them.
How Do Credit Card Companies Verify Income?
Since income doesn’t show up on your credit reports, most credit card issuers don’t actually verify your income. For low lines of credit, it’s not worth their time or money.
Issuers may perform a “financial review” if you apply for multiple credit cards quickly or show suspicious behavior. Alternatively, they may use “income modeling,” which estimates your income using data from your credit reports.
Certain card issuers that cater to individuals with poor credit or no credit may also need access to your bank account so they can verify the balance. This is due to the fact that standard credit scoring systems won’t give them the information they need to make sure that borrowers with bad credit can afford their bills.
Issuers reportedly might also check that your income makes sense in the context of your employment. They’re probably not, however, going to call your employer or the IRS.
But that doesn’t mean you should lie on your credit card application. In theory, doing so would be considered loan fraud, which is a serious offense that carries heavy penalties or even jail time.
Although it’s extraordinarily rare, it does happen: One man paid nearly $50,000 in fines for falsely inflating his income on credit applications, and another got five years in prison.
Lying will most likely result in you having a higher credit limit than you can afford.
That could lead you to rack up high-interest credit card debt you can’t pay back. And, if you eventually declare bankruptcy, those lies could prevent you from receiving discharges of your debt.
In other words: Tell the truth. Every time.
Do Credit Card Companies Verify Income to Check for Lying? What to put for income on an application?
FAQ
What happens if you put wrong income on credit card application?
How much should I say I make when applying for a credit card?
Do you have to show proof of income to get a credit card?
How do banks check income?
How does a credit card issuer determine your income?
Issuers may employ “income modeling,” which uses information from your credit reports to estimate your income, or they may conduct a “financial review” if you submit several credit card applications in a short amount of time or exhibit suspicious behavior.
Can a credit card issuer verify my income?
A credit card issuer may request proof of income documents to verify your stated income. But a lender won’t typically call your employer or the IRS to verify your income. Proof of income documents may include, but aren’t limited to: If you don’t have the requested documents, don’t panic.
How do you report income on a credit card application?
When reporting your income on the credit card application the best guidance is to follow what is on the credit card application and remember these three rules: Be truthful. Remember that misreporting income can have consequences, from adverse action like decreasing credit limits to criminal penalties. Report income you have access to.
Can a credit card lender verify your income?
Report your income, debt, employment status and housing costs correctly on your credit card application. Chances are, your lender won’t verify these items. But it has every right to, and if it does, you could end up in big trouble.