Do Credit Card Companies Verify Income?


Credit card Q&A: “Do credit card companies verify income?”

With all the recent rule changes shaking up the industry, you may be wondering how credit card issuers actually determine whether you’ll be approved or denied when applying for a credit card.

And while credit scoring is paramount in that decision, other underwriting metrics are also called upon, though perhaps in more of a clandestine fashion.

One being income, that is, how much you bring in each year to ensure you actually pay off your bills.

That Income Box

If you’ve filled out a credit card application lately, you’ll probably recall a box labeled “gross income” or “gross annual household income.”

You may have also noticed that for applicants under the age of 21, they want “personal annual income.”

This is in place to ensure kids don’t throw their parents income into the mix, despite the fact that their parents won’t be on the hook if they’re unable to pay their bill.

The recently passed CARD Act also requires credit card issuers to consider a card holder’s ability to repay, so household income should be transitioning to personal income for all applicants, though that only appears to be the case sometimes.

Taking Your Word for It

Regardless, the “beauty” of this box is that the credit card issuers are “taking your word for it.”

They won’t actually call your employer or ask for paystubs/tax returns to verify your income, unless they explicitly say so.

Not so fast though…you can’t fool the credit card issuers by putting in some astronomical number on your application.

Similar to how your credit history is documented, the 3 major credit bureaus are now in the “income estimation” game as well.

Experian has already revealed that it can nail down your income to the nearest thousand, regardless of what you put in that box.

Once you are approved, there’s a chance the card issuer could ask for your tax transcripts via IRS Form 4506-T, Request for Transcript of Tax Return, which designates a third party such as a credit card company to receive income information.

This may occur during a routine review of your account if the company sees a reason to question anything.

If the numbers are way off or even slightly off the issuer could technically lower your credit limit. I don’t know if they could close your account too, but there is some risk to fudging the numbers aside from it being unethical.

You Leave Lots of Clues

How you ask? Well, by scouring all that information on your credit report, which includes monthly obligations, credit lines, employment information, and so forth.

So if you say you make $100,000 a year, but your max existing credit line is only $1,000, eyebrows will rise.

Same goes for what you list as your occupation related to your supposed salary.

Put simply, things need to make sense for the credit card issuer to approve your application and extend the appropriate credit limit.

Even if you do make a lot of money, if you have a ton of outstanding liabilities, they will raise your “debt-to-income ratio,” which is your monthly liabilities vs. gross income.

If you make $10,000 a month, but pay $5,000 each month to your mortgage lender and another $1,000 to the company that finances your car, it won’t leave much left over for a significant credit card limit.

In summary, while the use of income is still being “figured out” by the credit card issuers, it will pay to be honest and consistent when providing such information, as it appears it will be collected and tracked for the long haul.

So any misinformation could come back to bite you.  And hey, if you don’t make that much, why would you need a giant credit line?  Sounds like it’d be more trouble than it’s worth.

Read more: What credit card limit can I get?

By Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.

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