How Do Credit Card Companies Verify Income?

July 6, 2015, Written By Jason Steele
Credit Card Application Form on a clipboard with a pen on a wooden desk

Credit card applications are filled with a lot of questions, most of which are easy, but some that can be hard. One of the questions that often stymies people is when it asks for your income. Even though most people will try to accurately report their income, it begs the question, how will the card issuers verify the amount that you state?

How income verification works

In most cases, a credit card applicant’s stated income will not be directly verified before an account is opened. Unlike a larger loan like a home or car mortgage, credit card issuers generally rely on the stated income of the applicant. However, they do make sure that the income is consistent with other information on your credit report. For example, the amount of money that you have as a payment for a car or home loan may give them some indication as to your income.

In addition, American Express is known for occasionally performing a financial review on its cardholders. When this occurs, cardholders find all of their accounts suspended, and American Express will demand that you fill out a form granting them access to your tax returns so that they can verify your income. Once this is complete (and your income matches what you stated), then your accounts are reinstated.

In other instances, it is possible that a credit card issuer will ask for some sort of income verification if you have amassed a large amount of debt and are having trouble paying it off.

What you can count as income on a credit card application

Thankfully, credit card issuers are very generous when it comes to the forms of income that can be included in a credit card application. In addition to your employment income, you are allowed to include income from investments, government benefits, alimony, and child support. Furthermore, the Consumer Financial Protection Bureau has issued a rule that allows card issuers to consider the applicant’s household income. This means you can include the income of your spouse or domestic partner, so long as you have a reasonable expectation of access to this income in order to pay off a loan.

Why you should provide your correct income on a credit card application

Of course, it is important to be honest and it is wrong to lie. Furthermore, it is always possible that your income will be verified in some way in the future, even if it is not done so on the application. But if those motivations aren’t sufficient to keep you honest, consider that lying on a credit card application is a form of financial fraud, and is illegal. In fact, doing so is punishable by fines and even jail time. While this is an extreme result, there have been cases where people have been convicted of lying about their income on their credit card application, after they received a large line of credit that they failed to pay back.

In 2012, David P. Gaylord of Rochester, New York was convicted of bank loan application fraud after he stated an income of over $90,000 despite reporting just over $12,000 in income to the IRS. Gaylord had racked up tens of thousands of dollars in credit card charges before declaring bankruptcy. As punishment, he was was convicted of bank loan application fraud, sentenced to time served and five years’ supervised release, and ordered to pay $46,914.73 in restitution.

Ways to improve your chances of being approved for a credit card

While you definitely shouldn’t overstate your income, there are other ways to increase the possibility of being approved for a credit card account. First, it can be important to pay down any existing credit card balances. This includes not just credit cards where you have revolving debt, but any credit card that shows a balance on its statement. These statement balances are reported to the major consumer credit bureaus as debt, even if you avoid interest charges by paying your balance in full each month. So if you have been using your credit cards heavily, you may want to pay off your balance before the statement is issued, so that you don’t have that amount reported as debt.

Furthermore, you can also be sure to pay off any existing balances you might have with the credit card issuer your are applying to. Doing so will instantly have the effect of reducing that card issuer’s exposure to you. And if your application is denied, you can always call the credit card issuer and ask the company to reconsider your application. You may suggest they close an existing credit card account, or just transfer part of your balance from the old account to the new one.

You can take steps to maximize the chance of being approved for a new credit card, without overstating your income. And when you do so, you will be rewarded with the credit you deserve.

The information contained within this article was accurate as of July 6, 2015. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.