Recent changes to the law on reporting income on credit card applications have made credit card household income okay again for individuals 21 and older.
Credit Card Accountability Responsibility and Disclosure Act (CARD) and reporting income
In 2009, the CARD Act changed the way credit card applicants reported income. Prior to this law, card issuers asked for an applicant’s “total household income” when completing a credit card application. At that time, young adults with no income of their own yet could include parents’ income on credit card applications if they still lived at home. Spouses and partners who didn’t work outside the home were able to report the income of the employed household member in order to qualify for credit. Another difference was a sole reliance on the consumer’s credit history to extend credit.
The CARD Act changed all that. One issue the new regulations specifically targeted was student credit cards. Banks had gotten into the habit of handing out credit cards to young adults with no personal income of their own, instead allowing them to report credit card household income. Many of these students would start using their cards indiscriminately and quickly build a balance they had no means of paying, either leaving their parents saddled with the bill or defaulting on the card and damaging their credit right out the gate.
The CARD Act established a requirement for young adults to have their own personal income to qualify for a credit card, demonstrating their ability to pay the bills for their credit card without the assistance of their parents’ income. This was referred to as the Ability to Pay (ATP) rules. Card issuers started using complicated mathematical formulas to determine whether applicants would be able to make their minimum credit card payments.
The downside to the ATP rules was their impact on stay-at-home spouses and partners. With no personal income of their own, suddenly these consumers were unable to qualify for a credit card. Finally, in the spring of 2013, the Consumer Financial Protection Bureau (CFPB) made some changes to the CARD Act regulations that addressed this problem.
The new rules allow an applicant who is at least 21 to report the income of his spouse or partner when applying for a credit card. Card issuers may consider this shared income for new applicants and for customers requesting a higher credit limit. This allows stay-at-home spouses 21 and older to use their spouse’s eligible income on their credit card application.
Therefore, these government mandated income credit card requirements now allow you to include third-party income as long as you are at least 21 years old and you have a reasonable expectation of access to this income. This could be demonstrated by having a joint checking account, because that means you have access to those funds. This includes adult children or students over 21. They may report the part of their parents’ income that they have access to. This too could be via a bank account, or through a monthly stipend. The important factor is that they have an actual expectation of access to the income they are reporting on their application.
Young adults between the ages of 18 and 21, however must still have their own income in order to qualify for a card. There is no longer credit card household income for these applicants. Their parents’ income is not eligible. Because card issuers are not legally required to verify the reported income, these young applicants typically do not have to provide proof of their income though. Instead, most issuers apply an income estimation model.
Income Estimation Models
When you apply for a credit card, the credit agency takes the information you provide, such as self-reported annual income, your social security number, birthday, and your address, and submits it to a credit reporting agency. This credit bureau uses the income models to generate an estimated income. The goal is to come within $1,000 of the applicant’s actual income.
If the estimate is off significantly, an alert is triggered and the applicant may then be required to provide proof of income.
This question is about Credit Cards
@WalletHub • 04/14/20 This answer was first published on 04/14/20. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not
provided, reviewed or endorsed by any company. Annual income on a credit card application means the total income you receive and have access to in a calendar year. That includes personal income, gifts, your spouse’s income, retirement income, income from investments, scholarships, Social Security payments, etc. Applicants under 21 years old, however, may only consider their personal income, which excludes someone else’s income, but can include allowances and certain scholarships if the money gets deposited in the applicant’s
bank account. Or, they can get a credit card if someone adds them as an authorized user. What to include in annual income on a credit card application: Accurately reporting your income helps credit card companies determine what you can realistically handle for a credit limit. You don’t want to leave out any reliable income that can demonstrate your ability to pay. Needless to say, it’s illegal to lie about your income on a credit card
application – it’s considered fraud, so resist the temptation. WalletHub, Financial Company
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What is a good income for a credit card?
A good annual income for a credit card is more than $39,000 per annum for a single individual or $63,000 per year for a household. Anything lower than that is below the median yearly earnings for Americans. However, there’s no official minimum income amount required for credit card approval in general. It varies by credit card company and from individual card to card.… read full answer
For example, the Capital One Venture Rewards Credit Card requires at least $425 more in income per month than you spend on rent or mortgage payments. Generally, the top 10 issuers either have no minimum income requirements or do not publicly disclose that information.
Reasons Why Income Is Required
By law, credit card companies are required to ask for your income. Lenders can only issue you a credit card if they’re confident you can make at least the minimum monthly payments and that you have the ability to repay any balance you may incur. In addition to employment income, you should also report any alternative sources of income. This includes alimony, Social Security or pension payments, and investment income, among other sources.
Applicants under 21 years old can only report “personal income.” This may include money earned from a job, of course, as well as things like investment income, inheritance distributions, or even an allowance that someone regularly deposits into your bank account. You cannot include your parents’ income unless they co-sign for your card, and major issuers don’t allow co-signers anymore. If you’re over the age of 21, you can add in someone else’s income that you may have reasonable access to, such as the salary of a working spouse.
There’s still another part of the equation, and that’s how much debt you have. Issuers will review your debt in relation to your income to determine how much more you can afford to borrow and how risky you would be as a borrower. Issuers set your credit limit based on this information and other factors like your credit history. There’s no specific cutoff for credit cards, but you’ll want to maintain as low of a debt-to-income ratio as possible.
Finally, you should always be honest and accurate when reporting income on a credit card application. Knowingly entering false info is illegal.
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Can you get a credit card without a job?
You can get a credit card without a job. Most credit card applications have a section for employment information, but you can also put student, homemaker or unemployed. Annual income and assets are more important than employment status when applying for a credit card, though.
Income is usually from a job, but it can also come from other sources like an inheritance or investments. Your assets are anything of value that you own. For example, if you have a rental property, the property would be an asset. And the rent you charge would be part of your income.… read full answer
If you’re under 21 years old, you’ll need your own income source to qualify for a credit card. That could include a regular allowance from your parents, though. If you’re over 21, you can list household income that you have reasonable access to. For example, a stay-at-home parent could list their spouse’s income. Without a job or any income, a credit card will be much more difficult to get.
How to get a credit card without a job:
- Put down non-employment income: You can list alimony, disability benefits, certain scholarships, and investment or rental income, for example.
- List shared income: If you have consistent access to someone else’s income, you can list that. For example, it could be an allowance from a relative (if you’re under 21 years old) or your partner’s pay (21+).
- Become an authorized user or get a joint account with someone else: An authorized user can make charges on someone else’s account. But the primary cardholder owns the account and is legally responsible for paying the bills. This option is the easiest way to get a card and start building credit. You can also get a joint credit card from U.S. Bank without a job, as long as the co-owner has enough income. But in a joint credit card arrangement, both people are liable for the debt.
- Get a secured card: To get a secured card, you must put down a security deposit (usually $200+), which serves as the credit limit. Since there is no possibility of borrowing more than you can pay, secured cards are easier for people with limited income or bad credit to get.
You can get a credit card without a job as long as you have enough income or assets to pay your bills. So being out of work doesn’t mean losing out on the opportunity to improve your credit score or enjoy the convenience of plastic.
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