For the most part, credit card applications are pretty straightforward. Off the top of your head, you hopefully know your name, date of birth, address, social security number, etc. However, perhaps one aspect of an application that’s less straightforward is sharing your income. In this post I wanted to take a closer look at that.
Continue reading: What Income Can You List On Credit Card Applications?
Share your questions, experiences, and thoughts below.
Credit Card issuers are looking at other factors besides your stated income. They know better!!
As an example, you may claim $1M income, but if you have several heavy dings (repossessed car, extreme outstanding c/c balances, prior legal awards against you, delinquent property taxes, liens against your property, IRS garnishments, bad credit score, etc), your changes are minimal or the assigned interest rate will be sky high.
Just give your best estimate on earnings for the year. The credit card companies already have a range in mind and you'll need to prove otherwise if you fall out of the parameters. Don't sweat it!!
I suspect issuers can estimate an applicant's income fairly accurately based on credit history. While there might be outliers, such as the person who makes $10 million a year but declines to use any credit facilities, for most people the credit usage and income is going to have a pretty typical ratio.
As for the example of someone with $100M of assets but an investment loss in the year for which they apply for a credit card, I would just impute an income based on the current risk-free rate. (This assumes that the assets are liquid and unencumbered.) Today's risk-free rate is pushing 4%. So if you have $100M of assets, reporting a $4M annual income would be perfectly reasonable.
Between the lines of your reasoning is exactly why there is no clear definition of income. And the reason capitalism works, and also how it's broken by wallstreet who pushes it to the limits.
What you make just gives a credit profile bucket to put you in. As long as the money keeps moving they are just dealing with each person based on the bucket.
You pay in full? Good you are a low yield cash cow.
Carry balance? As long they convince you to keep paying, you are a risky high yield investment.
If they really want a transparent system or exact number they would leave the discretion out of the value. The same way they force your passwords to include certain criteria.
In March me and my wife applied for the Wells Fargo Autograph Journey card - good income, FICO score of 818 for both of us. We both were asked to send them the last 2 paystubs to verify income, which was straightforward for my wife (drawing monthly salary), but for me it was problematic, because of my business during the first 2-3 months of the year I do not draw income. I called Wells Fargo, explained it, so then they wanted my whole 2023 tax return faxed to them instead (from a Wells Fargo branch). Once they got it, I got approved too.
This is where the system is broken.
What's the point of having a credit history from a credit bureau if you don't trust it.
Sending in 1040 isn't as bad as asking for 4506T but equally broken.
I really like to see statistics of people with 800+ score significantly inflate income then default in a few months.
It may not be common for them to ask you for proof of income but they often do. It also depends on the situation. For example, if you have a low credit line but want to raise it they may be willing to do so if you prove your income, if they cannot easily justify it.