How Do Credit Card Companies Verify Income?

by | Feb 22, 2021 | Billsaver, Understanding Credit Cards

Income can fluctuate. While some people earn a consistent annual income, others may receive bonuses, overtime or work non-traditional, freelance jobs. Once you apply for a credit card, how do credit card companies verify the income your report?

Income Verification

Unlike mortgages or car loans, credit card issuers will rely on an applicant’s stated income when opening an account. This means your income will not be verified before your account is open. They do, however, make sure your reported income is consistent with the other information on your application. The payment amounts you listed for your car or home loans will give them a sense of your income.

There are a few exceptions. One is if you have amassed a large amount of debt and are struggling to pay it off. In this instance, the credit card company might ask for income verification.

American Express is also known for performing occasional financial reviews of its cardholders. When this happens, AmEx will suspend the cardholder’s account and ask for access to your tax returns, so they can verify income. When this is complete, cardholder privileges are reinstated.

What Counts As Income?

You can claim more than just your employment income. Other forms of income you can claim on your application include alimony, child support, investments and government benefits. Also, the Consumer Financial Protection Bureau has ruled that card issuers must consider an applicant’s entire household income, which means you can include your spouse’s or domestic partner’s income, as long as you have access to this income to repay your loan.

Why Is It Important to Report Accurate Income?

Not only is honesty always the best policy, it is possible that your income will be verified in the future. Lying on a credit card application is a form of fraud and is against the law. If you’re caught, you can face fines and jail time.

While this may seem extreme, there are cases wherein people have been convicted for lying on their credit card application after they amassed a massive debt and were unable to pay it back.

How Can You Improve Your Approval Chances?

While you should not lie on your application, there are some things you can do to increase your chances of approval. First, pay down all existing balances–not just cards with revolving debt. Even if you pay off your statement each month, balances are reported to credit bureaus as debt. Thus, if you have been using your credit cards, pay off the balances before the new statement is issued.

You also want to pay off any balances you have with the credit card issuer to whom you are applying. This will lower the amount of exposure the company has with you. Also, if the credit card company declines your application, you can call and ask them to reconsider by suggesting that they close the account you already have with them or transfer part of your current balance from the existing account to the new one.