Income to Be Used for Credit Card Approvals
Your income may become a more important factor in determining whether you’ll be approved for a credit card, according to a post in the WSJ.
The paper said beginning in February, credit card companies will be required (Credit Card Bill of Rights) to consider an applicant’s income or assets/current debt before extending credit to ensure consumers have the ability to repay.
In preparing for the change, the credit bureaus have already gotten in on the income estimation business, with Experian reportedly nailing down income to the nearest thousand.
They came up with their estimates by matching credit reports with wages, interest, and investment income, along with total credit lines and related payments.
These income estimates will help credit card issuers approve or decline applicants, and may also be utilized to increase or decrease an existing credit line.
In the past, credit card issuers simply asked consumers to enter their gross annual income in a box on the application form, but soon you could be required to provide pay stubs, tax returns, or be asked to fill out a form 4506, which allows the IRS to release your tax filings to lenders (so no fudging the numbers).
What the changes really communicate is that credit scoring has proven to be unreliable, at least as a standalone determinant of capacity to repay debts.
Of course, the income estimates are just ballpark figures when it comes down it, which is why the credit bureaus’ contracts prohibit card issuers from turning down customers based solely on the information.
See: why credit card regulations are worthless.
Related Topics:
- Your Credit Card Application Has Been Declined
- Getting a Credit Card If You’re Under 21
- A Denied Credit Application
- Get a Free Credit Report Without a Credit Card
- How to Stop Receiving Credit Card Offers
Posted Under: Credit News