How to Report Income on Your Credit Card Application

Personal income counts, but for borrowers over 21, so can income to which you have a "reasonable expectation of access."
Profile photo of Claire Tsosie
Written by Claire Tsosie
Assigning Editor
Profile photo of Erica Harrington
Edited by Erica Harrington
Senior Copy Editor
Fact Checked
How to Report Income on Your Credit Card Application

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

If you have a job with a fixed annual salary, reporting your income on credit card applications is easy. But for millions of students, stay-at-home parents, hourly-wage workers and freelancers, reporting annual income is much trickier.

You want to tell the truth, but the applications rarely make it clear how you should calculate such a number. What’s an honest consumer to do?

Video preview image

What counts as income

Before the Credit Card Act of 2009, it seemed as though everyone with a pulse could get a big credit line. Today, that’s no longer the case. The Card Act requires lenders to extend credit only when they believe the borrower has the ability to repay it. The income you report on your credit card application is one way creditors decide how much credit they should extend to you, if any.

Ready to earn your first $100 in rewards?
Nerdwallet+ members can earn $100 in rewards by paying their first bill on time with one of these eligible credit cards.

For those age 21 and older

According to an amendment to the Card Act, borrowers over 21 can list any income to which they have “reasonable expectation of access.” This broad definition includes:

  • Personal income.

  • Income from a spouse or partner.

  • Allowances and gifts.

  • Trust fund distributions.

  • Scholarships and grants.

  • Social Security income.

Have a kid in college? See how you can help them:

For those under 21

Borrowers ages 18-20 can report only independent income, which typically includes:

  • Personal income, including regular allowances.

  • Scholarships and grants.

Right now, there are no specific legal guidelines about how irregular income should be calculated. But generally, you should report only income that can be verified by tax returns, a letter or some other document.

“Use common sense,” says Ira Rheingold, executive director of the National Association of Consumer Advocates. “If you can’t prove the income exists, you shouldn’t list it.”

Remember, when your issuer assigns you a credit limit based on your income, it’s not a trust fall. If you default, your creditor won’t be there to catch you; it'll be asking for its money back.

🤓Nerdy Tip

Credit card approval depends on your income, but it also hinges on your credit history and your debt-to-income ratio, which is your current debt payments as a percentage of your income.

What doesn’t count as income

It’s not a good idea to state borrowed money, including student loans, as income. Although there’s no specific law against it, such reporting would go against the spirit and intent of the "ability to pay" clause in the Card Act, Rheingold says, and could hurt your finances.

"It’s debt, it’s not income," he says of borrowed money. "In my mind, it’s a really bad idea, bordering on the absurd.”

When the loans come due, paying back the balances on your cards could prove difficult.

When issuers check your income

Most card issuers use a consumer’s stated income on applications when issuing a card. But in some cases, your creditor may ask to you to verify your income or use an income modeling algorithm to estimate your earnings, explains Natalie Daukas, a senior product manager at Experian.

Income modeling

Income modeling algorithms, produced by credit bureaus, estimate your income based on your credit report information. Creditors typically use these to double-check stated incomes or determine credit line increases on existing accounts, Daukas says. For credit card companies, these estimations are an easy way to quickly assess a borrower's financial standing, without requesting access to tax documents and other verification.

Financial reviews

If you’re spending a lot or applying for several cards within a short time, some creditors will run what’s called a financial review to verify your income. Such reviews are expensive for creditors to conduct, though, and tend to be rare.

During such a review, you may be asked to provide tax returns and other documents to verify your income. If you can’t provide proof of your reported income, the creditor may lower your credit limits or close your accounts.

What happens if your estimated income is off

Estimating your annual income in good faith and coming up short is completely understandable. Inventing self-employment income, grossly inflating your actual income or listing a nonexistent employer, though, is a different matter entirely.

If a creditor can prove in court that you committed fraud when applying for a certain card, it could make that debt unable to be discharged in a bankruptcy proceeding, says Scott Maurer, an associate clinical professor of consumer law at Santa Clara University. On very rare occasions, people have also been convicted of fraud for lying about their income on credit card applications, resulting in steep fines and jail time.

But if you've reported your income to the best of your knowledge, don't worry about this.

“Proving fraud is not easy, and a consumer who truthfully lists monthly income that happens to be irregular is not going to come close to losing such a suit,” Maurer says.

The bottom line

Listing all the income you have access to can help you secure a higher credit line and therefore more spending power. But it doesn’t mean you’re immune from overspending. Borrow sparingly, try to avoid carrying a balance and readjust your budget if you face an unexpected income change, such as a job loss or a pay cut.

Your creditor will do only so much to prevent you from defaulting, based on your stated income. The rest is up to you.

Find the right credit card for you.

Whether you want to pay less interest or earn more rewards, the right card's out there. Just answer a few questions and we'll narrow the search for you.

Get Started
Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.