How to Report Income on Your Credit Card Application

Applying for a credit card isn’t a complicated process, but the basic information you’re asked to submit has a huge bearing on whether you’re approved.

credit card application

In addition to personal data like your name, date of birth, address, and Social Security number, you’ll also be asked to state your annual income amount.

Utilizing this information, along with your credit score, the credit card company then decides whether to approve your application. Of course, your credit limit and APR are also affected by these results. But figuring out how to report your income can be a little tricky.

We’ll take you step-by-step so that you know exactly what does and doesn’t count as income. That way, you’ll have the strongest application possible to access the best terms.

Why Credit Card Issuers Want to Know Your Income

Prior to 2009, there were few laws regulating credit card issuers and how they approved applications. It was much easier to qualify for a credit card at that time because there was no requirement for credit card companies to ask for the credit card applicants’ income — and they typically didn’t.

While this may sound great (credit cards for everyone!), giving everyone a credit line came with consequences. The lax regulatory environment resulted in many people going into default or bankruptcy. And, of course, this ruined their credit scores.

That all changed with the Credit Card Act of 2009. One of the new rules included in this legislation was that creditors must believe that you have the ability to repay your debt.

To figure this out, they added income as part of the information required on all applications. This helps the credit card issuer establish your ability to pay, particularly when weighed against the current level of debt listed on your credit report.

What Counts as Income on Your Credit Card Application

You’ve filled out the rest of your application and are down to the final entry: your annual income. If you have a non-traditional income stream or several income streams, you may wonder what actually counts in this field.

The answer to your question actually depends on your age. Here’s how it breaks down.

If you are 18 – 21 years old:

In this age bracket, you can only use independent income, including personal income (to include “regular allowances”), scholarships, and grants. So if you’re in school and receiving financial aid besides student loans, you can likely use it on your application.

Think about everything you receive: a work-study job, teaching assistant stipend, paid internship, or any other type of monetary supplement that you can use. Of course, part-time jobs (or a full-time job for that matter), whether you’re attending college or not, can also be counted towards your personal income.

If you have a question about a specific type of income, you can always call the credit card issuer’s customer service line. They can point you in the right direction so that you don’t make a mistake in reporting your income.

Don’t expect a high credit limit at this age, especially if it’s your first credit card. Be honest with your reported income, and they’ll get you set up with the right credit card.

If you are 21+ years old:

For those aged 21 or over, a broader range of income sources can be considered in your application. While the term “reasonable expectation of access” is somewhat subjective, it encompasses various income types. Here’s a breakdown of common income sources for this age bracket:

  • Personal income from one or more jobs
  • Your spouse’s or partner’s income
  • Gifts or stipends
  • Trust fund distributions
  • Grants and scholarships
  • Retirement fund distributions
  • Income from Social Security payments
  • Alimony and child support

You can see that there are actually plenty of sources you can count as income beyond a typical 9-5 job. And if you’re not the main wage earner of your family, you can still use income from your household to qualify for your own credit card.

No matter your current situation, you have plenty of options beyond a normal paycheck to use as part of your annual income on a credit card application.

Household Income Rules

As mentioned in the last section, you can use household income in addition to your own personal income when applying for a credit card.

Here’s exactly what that entails since the Credit Card Act of 2009. As long as you’re over 21, you can use your spouse’s or domestic partner’s income just as it were your own.

One stipulation is that you must both be able to access the money in one or more joint accounts. You certainly could just have the main earner open up a credit card account and add the other person as an authorized user. This can also help boost your credit scores.

However, this method gives you the option of having separate credit histories. That being said, when applying for your own credit card, you’ll only be able to use your own personal credit history, regardless of your monthly income source.

lady on laptop

Students Over 21

Students who are 21 or older may also use household income in the context of their parents’ earnings. However, you still must be able to have that “reasonable access” to your parent’s income. If you only get some of it, say through a monthly stipend or allowance, you may only report that much as part of your income on the application.

Roommates sharing an apartment or house may not combine incomes as an exception. You probably aren’t sharing bank accounts, and in this situation, there wouldn’t likely be any reasonable access to your roommate’s income.

The focus is primarily on spouses, domestic partners, and sometimes, parents. Remember that the two main components are reasonable access and joint accounts. You can correctly utilize this to qualify for your next credit card when you keep those things in mind.

Why Loans Don’t Qualify as Reliable Income

Although there isn’t a specific law prohibiting loans from being listed as income on your credit card application, it’s vital to understand the intended purpose of reporting income. Income should reflect your capability to manage and repay credit card expenses. Thus, many financial experts advise against including debts, like loans, as a part of the income you report.

This encompasses all forms of debt, from personal and student loans to other credit cards or even home equity lines of credit. A notable exception might be a reverse mortgage, where an older homeowner taps into their home’s equity to receive consistent monthly payments from a lender. Unlike these payments, traditional loans aren’t a steady source of income.

Picture a scenario where all your debts become due simultaneously, and, for unforeseen reasons, perhaps a job loss, your primary income source evaporates. Could you manage to repay your credit card using other loans as your income? Unlikely.

Remember, debt is a liability, not an asset. So don’t treat it as one when it comes time to apply for credit cards. Instead, answer the income question fully and accurately to avoid any future trouble.

How is income verified?

So, what’s the incentive to answer truthfully about your annual income on your credit application? In some cases, the credit card issuer may actually do some extra digging to verify your information.

When reporting your income, the best thing to do is to make sure you have some type of documentation to support anything irregular, such as tax statements.

You essentially just need some type of proof that you do indeed receive the income. Even so, there are a couple of different ways creditors attempt to verify your income. They might not do these every time, but you never know.

Documented Proof & Income Modeling

First, they may ask for documented proof of your income. In other instances, they might use income modeling, a tactic created by the major credit bureaus.

Credit card issuers use the information on your credit report to determine how much you likely earn. They can also check out whether you’ve had an increase in credit limits on your current accounts.

filling out application

While some of this data are simply estimates, they do give the credit card company a fair reflection of your current finances. And from their perspective, it’s much more efficient than requesting documentation from you.

However, in some cases, credit card companies may feel compelled to perform an in-depth financial review before approving your application. The process is rare because it’s so expensive and time-consuming. However, it’s wise to be prepared for such a scenario. Failure to substantiate your declared income might result in reduced credit limits or even account closures.

You’ll actually be asked to prove the income you stated on your credit card application during this process. You’ll need tax returns and anything else to get to the number you stated. Again, this is why it’s vital to understand what can and cannot be included as part of your annual income.

The Consequences of Inaccurate Income Reporting

So, is stating your income accurately really that big of a deal? You bet it is. Obviously, a small discrepancy isn’t going to raise any red flags. But grossly misrepresenting your income is a big problem, especially if you create false or non-existent revenue streams.

While these extreme scenarios are rare, they certainly can happen. That’s because you can potentially be convicted of fraud for lying on your credit card applications. If that occurs, you’re looking at big fines and even jail time. However, this is one of the unlikeliest of scenarios.

Lying on Your Application

Lying on your credit card application is something that can come back to bite you if you’re facing bankruptcy. If the credit card company can prove you lied on your application, the resulting debt may not be discharged as part of your bankruptcy settlement. In other words, you’ll still be required to pay what you owe on the card.

The creditor will have done their due diligence in determining that you’re able to repay any debt incurred. But if you grossly misrepresented your earnings, they couldn’t accurately make that judgment as required by the Credit Card Act.

Of course, an innocent mistake isn’t going to land you jail time or put you into bankruptcy. So do your best to estimate your income in good faith and keep proper documentation even after you’ve been approved for the card.

Those are good accounting habits to keep, anyway, so covering your bases for your next credit card application is just the icing on the cake.

Next Steps

While modern regulations provide clarity on income reporting for credit card applications, there’s still a degree of flexibility. By grasping the nuances of what income qualifies and what doesn’t, you’re setting yourself up for success.

Beyond income, credit scores play a pivotal role in the application’s outcome. While your earnings might be fixed to an extent, there’s ample room to improve your credit score. It’s also worth noting that credit card approval doesn’t solely rest on income and credit history; your debt-to-income ratio — representing your current monthly debt payments relative to your income — is a significant consideration.

By understanding and optimizing all these factors, you’re better positioned to secure the credit card that best aligns with your financial goals.

Frequently Asked Questions

What’s the difference between net income and gross income?

Gross income refers to your total earnings before any deductions, such as taxes, health insurance, and retirement contributions. On the other hand, net income, often referred to as “take-home pay,” is the amount you receive after all these deductions have been subtracted from your gross income.

When reporting income on a credit card application, it’s typically the gross income that is of interest to issuers, as it provides a comprehensive view of your total earnings.

Can I include freelance or gig economy income?

Yes, any legitimate source of income from freelance or gig economy work can be reported as long as you can provide proof if asked.

What should I do if my income varies month-to-month?

If your income fluctuates, you can calculate an average monthly or annual income based on recent months or years. It’s essential to be as accurate and honest as possible.

Can I include rental income from properties I own?

Yes, rental income is a legitimate revenue stream that can be included as long as you can provide evidence, such as lease agreements or bank statements.

How do joint applications work regarding income reporting?

For joint applications, you can typically combine both applicants’ incomes. Each issuer might have its guidelines, so it’s best to check directly.

Lauren Ward
Meet the author

Lauren is a personal finance writer who strives to equip readers with the knowledge to achieve their financial objectives. She has over a decade of experience and a Bachelor's degree in Japanese from Georgetown University.