Despite the popular emphasis on credit scores, that’s not the only factor a credit card issuer will look at when considering your application. An issuer will also look at other financial factors. That includes your income.
Whether you have a 9-to-5 job, you’re self-employed or you’re a retiree living off Social Security, there are many different types of income you can put on your credit card application to help you qualify for a card. Knowing what your credit card company looks at to determine your annual income before applying can help you decide whether or not you should apply and what amount to include on the application based on your circ*mstances. And reporting your income correctly isn’t just in your best interest. It’s required by law.
Your annual income helps your credit card issuer determine if you’re likely to be able to make the monthly minimum payment, before they approve you for a card. But it’s still up to you to ensure you can pay your credit card balance each month, and that starts with having a good understanding of both your income and expenses.
We’ll explain what types of income most credit card issuers take into consideration on a credit card application and how to calculate your annual income when filling out your application.
Should I report the gross or net income on my credit application?
You will need to report your gross income on a credit card application. That’s your annual salary before taxes and other deductions.
“Gross income is used to calculate your tax liability, while net income is the amount of money you have available to spend or save,” said Brandon Juodikis, a certified financial planner and founder of BRJ Wealth Management.
When applying for a card, reporting your gross income can work in your favor since it’ll likely be higher than your net income, which could positively affect your approval chances. But you should still account for your monthly expenses when using your card, to ensure you don’t spend more than you can afford.
How to calculate your gross annual income
If you know your annual salary and have no other sources of income, you can use that number directly as your gross income. You can also refer to your most recent tax return, which should include a gross annual income number. Otherwise, you may need to add up all your sources of income.
If you’re an hourly worker, multiply your hourly wage by the number of hours you work daily. For example, if you make $15 an hour and work eight hours daily, you would make $120 daily. If your job is five days per week, you multiply by five. So far, it would look like this:
$15/hr × 8 hr/day × 5 day/wk = $600/wk
This is your weekly income. To calculate annual net income, multiply that number by 52 weeks in a year:
$600/wk × 52 wk/yr = $31,200/yr
You’ll want to make sure you include income from all qualifying sources. We’ll go into which types of income should and shouldn’t be included on your credit card application below.
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Income to include on a credit card application
Credit card issuers will use different types of income to determine your approval and credit limit. Income includes:
- Federal taxable wages (from your job)
- Tips
- Self-employment income
- Social Security payments
- Social Security Disability Income (SSDI) payments
- Retirement or pension income, including most IRA and 401(k) withdrawals
- Alimony (depending on when the divorce or separation was finalized)
- Investment income
- Rental and royalty income
You can include child support and alimony in your income, but it isn’t required. You should also include income from your spouse on your credit card application, said Juodikis. Most credit card applications will ask for household income. For example, if you are married and file taxes jointly, the higher income will help you qualify for a higher credit limit and lower interest rates, he said.
It’s important to note that not all types of income are created equal. “Credit card issuers will typically give more weight to income that is stable and reliable, such as wages and salaries,” said Juodikis. “Income that is more variable, such as self-employment income, may be given less weight.”
Regardless of how large a credit line you’re approved for, remember that you are responsible for paying off your credit card balance in full each month. Otherwise, you’ll pay interest on the remainder of your statement balance.
Income you shouldn’t include on a credit card application
When calculating your income for a credit card application, there are a few types of income that you should not include, said Juodikis. According to credit bureau Experian, you shouldn’t include the following income on your credit card application:
- Unemployment benefits
- Lottery winnings and gifts
- Financial aid or funds for educational expenses that are paid directly to your school
- Loans
Falsifying income on a credit card application
Including income you don’t have or that you know shouldn’t be included on a credit card application is considered fraud. There can be serious consequences if you’re caught.
Card issuers can discover problematic data when an application is submitted, and they can periodically review an account after it’s approved. Regardless of when the issuer finds out, you could have your card closed and be asked to pay back your balance. The credit card issuer can also report it to law enforcement. US law says a person can face up to $1 million in fines and 30 years in jail time if convicted of application fraud.
If you don’t have enough income to qualify for a credit card, do not lie on your application. Instead, you may ask a friend or family member to become an authorized user on their card. Or you can ask them to be a cosigner for the card that you’re applying for. They’ll need to include their income and other personal information along with yours. If you’re having trouble getting a credit card for reasons other than income -- such as a low credit score -- you may consider getting a secured credit card.
Other information you may need for your credit card application
Besides your income and personal information -- like your mailing address, phone number and Social Security number -- there’s other information that the credit card issuer may ask for on your application. That includes:
- Employment status
- Housing costs
- Ownership or rental of your home
- Current employer
- Your main source of income
- Employer identification number (if applicable)
Additionally, you may be required to provide identifying documents with a photo, such as your driver’s license or passport and several recent pay stubs and tax documents for verification.
Editors’ note: An earlier version of this article was assisted by an AI engine. This version has been substantially updated by a staff writer.
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