Credit card application questions will ask you a series of questions when you apply online. What if you accidentally put the wrong income on your credit card application? Are there any potential repercussions?
The truth is that credit card companies do not typically verify the income of every applicant. This would simply be too costly and time-consuming, given how many applications they receive on a daily basis.
For this reason, it's a good idea to provide accurate information on your application. If you accidentally entered the wrong income, the safest bet is to change your income using your online account or call your card issuer to explain what occurred.
Lying about your income when applying for a credit card is considered fraud-- specifically known as loan application fraud. This is a crime that can come with some pretty substantial penalties, including fines and even time in jail.
You are signing a legal document when you apply for a credit card. For this reason, it's important to make sure you are reporting your income accurately.
Even though this sounds pretty scary, the truth is that it's pretty unlikely to be convicted for loan application fraud for misreporting your income on a credit card application. This is particularly the case if you only made a small error when it comes to reporting your income.
At the same time, people will occasionally be prosecuted for loan application fraud. For example, a particularly egregious case involved a Minnesota man who committed loan application fraud to the tune of nearly half a million dollars, immediately filing for bankruptcy right after he collected his last payment. For his crimes, he was ordered to pay more than $700,000 in restitution and spend 57 months in federal prison.
Major credit card issuers are likely receiving tens if not hundreds of thousands of applications on a daily basis. Despite their sizeable workforce, this makes it impractical to analyze each application closely.
Typically, it isn't worth expending the required resources for a credit card company to verify your income. Financial institutions will, however, ask for proof of income when the stakes are much higher, such as taking out a mortgage or another large loan.
Not quite sure what counts as income when applying for a credit card? Check out our guide to properly reporting income on credit card applications.
In some cases, credit card companies might ask you to submit pay stubs or bank statements in order to verify your income. However, they aren't going to be able to look at your bank account information without you giving them permission. How much money is in your bank account also won't appear on your credit report.
What credit card issuers will be able to see when they do a hard pull of your credit is your credit history. This will help them understand how risky you are as a borrower, which basically means how likely you are to pay back debt on time.
You can get free copies of your credit reports from AnnualCreditReport.com. By checking your credit reports, you can see what potential creditors will be able to see when they do a hard inquiry into your credit.
Even though credit card companies won't have easy access to your income or how much money you have in your bank accounts, you still don't want to overstate your income on your application. Issuers can sometimes ask applicants for proof of income randomly, and you could end up having your application rejected if your reported income doesn't match the proof you provide.
You will also draw more attention to yourself if you start falling behind on your payments. Financial institutions might investigate why you are being offered a credit limit you don't seem to be able to keep up with. For instance, American Express is known for watching out for red flags that can lead to an audit and a locked account. When this happens, borrowers won't be able to use their credit anymore until income verification or other data is provided.
Applying for a credit card these days is a very simple process. They'll typically ask you for personal and financial information, including your:
As you might imagine, having a higher income can help improve your chances of being approved. Beyond that, this can also lead you to receive a higher credit limit.
At the same time, it's really best to avoid overstating your income on a credit card application. Though there might not be any repercussions, particularly if you practice responsible repayment habits, the potential consequences are severe enough that it really isn't worth the risk.
What you should do if you accidentally put the wrong income on your credit card application is going to depend on a number of factors.
There also might be the ability to change your income through your online account. If you are worried about having improperly listed your income on your application and you were approved for the card, consider changing your income using the online interface.
If you lie on a credit card application, it is possible you could face some very unappealing consequences. Both the intent of the misinformation and the severity can impact how you are affected.
One thing that might happen if you lie about your income, even if accidentally, is that your credit card application could be denied. While credit card companies don't always verify income, it's possible that they could catch you in the act after some red flags are raised.
It is considered fraudulent to lie on a credit card application. For this reason, if fraud is suspected, your application will likely be rejected immediately.
If you were approved for a new credit card despite the fact that you misstated your income on the application, it doesn't necessarily mean you're in the clear.
If a credit card issuer becomes aware of a discrepancy between your reported income and your actual income, they could close your account. This is particularly true if it becomes clear that your income was intentionally misrepresented.
Telling the credit card company that you make more money than you actually do can mean you have access to a higher credit limit. While this might seem like a good thing-- after all, you can borrow more money, and it can help your credit utilization ratio-- there are some risks involved.
When you enter your income on a credit card application, the issuer will use this information (among other pieces of information) to calculate how much money they can extend to you.
If you are using more credit than you are able to actually pay back, this can have a negative impact on your credit score and leave you with spiraling debt. Some people are able to resist the urge to spend more than they can afford, but others are easily tempted to max out cards regardless of their ability to repay what they owe.
It is possible that there could be legal repercussions that result from providing false information. This is particularly the case if it appears you did so intentionally. While accidentally entering slightly incorrect income information might never come back to bite you, intentionally misrepresenting your financial circumstances could leave you facing legal action.
Before I sign off, let's take a closer look at some of the most common questions I'm asked about reporting income on credit card applications.
If you find yourself in a situation where you have to declare bankruptcy, there are a number of types of debt that can be wiped from your record. If you file for Chapter 7 bankruptcy, the following debts can typically be discharged:
However, your ability to use bankruptcy as a tool to escape credit card debt is going to be compromised if you misrepresent your income on a credit card application. If the financial institution believes that you lied on your application, they can ask that the debt you owe isn't discharged. By misstating your income, it can be argued that you never actually planned to repay the debt and instead had schemed to use the bankruptcy process to intentionally borrow money and have the debt discharged.
If you tell the credit card companies your income is higher than it actually is, whether intentionally or not, it can mean you are extended more credit than you can reasonably repay.
There are a number of potential risks of taking on more credit than you can handle. These include:
What else can happen if your credit limit is higher than you can afford? Here are some other things to watch out for.
Income is only one of the factors a credit card company will use to determine whether your application will be accepted and, if so, what your credit limit will be.
To calculate your credit limit, the information they'll use includes:
Beyond the particulars of your circumstances, other factors can influence the credit limit you are offered. For example, the state of the economy can have an impact on the underwriting standards of a credit card company. If the larger economy is in a bad spot, for example, you might not receive as high a credit limit as you would if the economy is robust.
If you're tempted to lie on your application because you have low or no income, you might be interested to learn about the best options for low-income individuals.
Here are some things you can look for when shopping around for a credit card for low-income earners:
If you want to apply for a credit card but aren't employed, you'll want to consider whether you have any income you can report on your application.
Here are some things you could include, if applicable:
If you simply don't have a consistent source of income that will help you qualify for a credit card, here are some options:
If you have only made a small error when it comes to your income on a credit card application, the chance that anything bad will end up happening is pretty small. At the same time, credit card applications are considered legal documents, and lying on these documents is considered fraud.
A large discrepancy between your stated income and your actual income could end up causing you trouble, on the other hand. The credit card company could ask you to verify your income and could deny your application or close your account if they find that you misrepresented how much money you make. Furthermore, credit card issuers could also use this as a reason to ask that your credit card debt not be discharged in the event that you file for bankruptcy.
In general, it's best just to be honest when you're applying for a credit card. If you made an honest mistake when filling out your income and your application was accepted, you can change your income in your online account. Depending on the difference between your stated and actual income, it's possible this could cause a change in your credit limit.
Are you on a mission to improve your financial literacy? If you're working to build credit, incorporate good personal finance habits into your life, and generally work towards your financial goals, make sure you check out the rest of our Credit Building Tips blog.