Do credit card companies verify income?

When you apply for a credit card, you’ll have to provide information about yourself. This includes information that helps verify your identity, such as a Social Security number. The application may also ask for some financial details such as your income. But do credit companies verify income listed on a credit card application? That depends on the issuer, but it’s always a possibility.

Why do credit card applications ask for income?

When you’re applying for a credit card, your potential lender wants to feel confident that you’ll be able to repay your debt each month. Part of determining that will likely include asking for income information. This can help credit card issuers better determine how much debt you can reasonably afford to take on and may influence the credit limit you receive if your application is successful.

Other information your application will probably request includes:

• Social Security number
• Date of birth
• Address
• Phone number
• Email address
• Employment status

Information like your Social Security number and date of birth help verify your identity, as well as prove you’re old enough to open a credit card. Most cards require people to be 21 or older to open a credit card, though some may allow it as young as 18 if the applicant has independent income or a co-signer.

To open a credit card issued in the United States, you’ll most likely need to provide an address within the U.S. Additionally, some cards are not available in all states, so where you live may impact your eligibility. A credit card application may also ask for a phone number or email address as ways to contact you as well.

Similarly to asking about your income, credit card issuers may ask for your employment status. This is also to help ensure you have a steady income in order to make repayments on your debt. In the same vein, issuers might reach out and ask you to confirm your income every year or so. This can help them ensure they’re offering you appropriate credit limits or products.

What qualifies as income?

When you’re filling out the income question on your credit card application, you may not be sure what to include. As a rule of thumb, you should be including all types of income — not just traditional salaried income. Other forms of income may include:

• Allowances or gifts (money regularly deposited into your account from someone else)
• Social Security income
• Retirement account withdrawals
• Non-taxable income, such as disability payments, worker’s compensation and child support
• Scholarships or grants
• Investment dividends and returns

To report your income, it may be helpful to pull your previous year’s taxes so that you have much of the relevant information in front of you. This will help you be as accurate as possible in case the issuer decides to verify your income. That may lead you to ask, “How do credit card companies verify income?” and “Why is it important to tell the truth?”

Will the lender verify income?

While a lender may not initially ask for information to verify your income, it doesn’t mean they won’t look into it eventually. Outright, a large discrepancy in income will raise a red flag quicker than a small one. For instance, if you claim $50,000 of income on your tax return but $150,000 on your credit card application, that’s much more likely to get flagged than a case where you simply miscalculated and claimed $50,000 and $52,000 on your tax return and credit card application, respectively.

However, even in the latter example, it’s still important to try and be as accurate as possible when reporting your income on credit card applications because the underwriting process has grown increasingly sophisticated. This makes it much easier for technology to catch inaccurate data than in the past.

Even after you’ve been approved, there’s nothing that prevents the lender from reviewing your account, even months or years down the line to ensure accuracy or during an auditing process.

It’s also important to note that lying on a credit card application is considered a form of fraud — one that could land you hefty fines or even prison time if you’re caught.

If your credit card is asking for an income update, you may or may not want to provide one. This is a voluntary action, and you won’t be penalized for ignoring the request. However, if you’re hoping for a credit limit increase, it may help to update your income, particularly if it’s now higher than it was when you applied.

Tips for choosing the right card for your income

What is a good annual income for a credit card? That’s a tricky answer, because there’s no single set income amount that will immediately qualify you for a credit card — the credit approval process is complex and considers several factors beyond just your income.

That said, there are several factors that might make a credit card the “right” one for you. Some things you may want to consider include:

• Annual fees: Keep in mind how much you can afford to spend on annual fees.
• Credit score: Understand your credit score and how additional debt may affect it.
• Current debt: Ensure you have the income to pay off any additional debt you may accrue with a new credit card.
• Rewards: Research the different rewards available and see how they might fit into your lifestyle. For instance, it may make sense to get a cash back credit card with bonus rewards for dining if you eat out often.

In summary

If you’re applying for a new credit card, there’s a good chance you’ll be asked for your income. This is mainly used to set a credit limit and assure lenders that you’ll be able to afford to pay your balance. While the lender may not always verify reported incomes, lying is considered fraud and you could be penalized if caught, so it’s best to be as truthful as possible.