If you knowingly report inaccurate data on a credit application, you’re committing fraud. And while a credit card issuer might not immediately request verification, legally its possible.
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When you apply for a credit card, the application will ask you a lot of questions, such as your Social Security number, how much money you make, whether you have a job, how much rent or mortgage you pay, and more.
If you knowingly report inaccurate data on a credit card application, you’re committing fraud, the penalties for which can include seven figures worth of fines and/or decades of imprisonment.
While credit card companies often will not ask for verification of things like income, legally they can. And either way, lying on a credit card application could come back to bite you, especially if you end up overextending yourself on the card.
Typically, a credit card application will require that you check a box to attest that, to the best of your knowledge, youre supplying accurate information.
When applying for a new credit card, you’ll likely need to provide information about your income. But how exactly do banks go about verifying the income you report on your application? Here’s an in-depth look at why banks ask for your income, whether and how they verify it, and tips for choosing the right card based on your earnings.
Why Banks Ask For Your Income
Banks and other credit card issuers request your income for a few key reasons:
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To determine if you can reasonably afford to repay debt Knowing your income helps issuers set an appropriate credit limit,
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To lower risk: Lenders are more likely to give loans to people who might not be able to pay them back. One way to check for this risk is to look at the applicant’s income.
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To comply with regulations. Banks have to make sure that people who want to borrow money can pay it back. One way they follow the rules is by asking for and checking income.
Essentially, your income gives issuers an idea of how much credit card debt you can reasonably take on. While income isn’t the only factor in credit decisions, it’s an important one.
What Counts As Income
When you fill out your application, make sure you list all of your sources of income. This includes:
- Salary and wages
- Self-employment or freelance earnings
- Investment returns
- Retirement account withdrawals
- Social Security benefits
- Disability and workers’ compensation
- Child support or alimony
- Scholarships and grants
Pulling your most recent tax return can help you gather these figures to report total annual income as accurately as possible. Any discrepancies between reported income and actual income could raise red flags.
Will Banks Verify Your Income?
There’s no guarantee a bank will verify your stated income prior to approving your application. But they certainly can if they want to. Here’s what you need to know:
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Income verification is more likely with large discrepancies. Say you report $50,000 in income but your tax return shows $30,000. That could trigger the bank to dig deeper.
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Even small mistakes can get flagged. Thanks to sophisticated fraud monitoring, even minor inconsistencies can potentially prompt verification checks.
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Ongoing account reviews happen. Even after months or years, your account could be looked at closely and your income checked to make sure it’s correct.
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Lying is fraud. Falsifying financial information on your application is a crime. Significant penalties can apply if caught.
The bottom line? Accuracy matters, even if the bank doesn’t verify upfront. Rely on documents like tax returns when applying to ensure you report correctly.
Tips for Choosing a Card Based on Income
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Consider annual fees. Avoid cards with hefty annual fees that don’t match your budget.
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Know your credit score. Adding debt can impact your score, so understand your current standing.
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Assess total obligations. Be sure your income allows you to manage payments on any new credit lines.
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Compare rewards opportunities. Pick a card with perks that match your lifestyle and spending.
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Seek low required income options. Some cards are accessible with lower or no set income requirements.
The Takeaway
When applying for new credit cards, issuers will likely request your income information. This allows them to gauge repayment risk and set appropriate limits. While income verification isn’t guaranteed, avoid lying on applications since inaccuracies could prompt checks or even fraud charges. Instead, take time to report earnings precisely. And choose a card with fees, rewards, and requirements that fit your financial situation.
What happens if you’re caught lying on a credit card application?
Lying on a credit card application can be a costly mistake, as it constitutes fraud and can result in up to $1 million in fines and/or 30 years in prison.
In 2012, a man was convicted of bank loan application fraud after being accused, years earlier, of reporting $12,488 of income to the IRS and $90,000-$122,000 of income on multiple credit applications. While he wasn’t fined $1 million or sentenced to 30 years in prison, he did have to pay a fine of almost $50,000 and was sentenced to time served and supervision upon release.
And keep in mind that while a lie may not be discovered immediately, its possible it could haunt you later. After all, if you feel the need to lie on a credit card application, it’s likely because such a product doesn’t fit into your budget. And if you can’t handle a high credit limit properly, it can quickly turn into a mountain of high-cost debt. (Credit card APRs are routinely in the double digits. ).
It can get worse than that, too. Credit card companies and other banks will try to figure out why you can’t pay if you’re so deeply in debt that bankruptcy is your only option. They will ask for a lot of information and paperwork from you, and if it doesn’t match what you said on your first application, it could get you in trouble with the law.
Does your lender really verify income and debt information?
By federal law, lenders cannot extend credit to someone without first determining that the applicant has the ability to make payments, which is why credit card applications ask for things like your income, employment information, and what you pay in mortgage or rent.
The credit card company might not ask for verification of such information, at least not immediately. And the truth is, large discrepancies are much more likely to raise red flags than “fudging.” For example, if you claim $10,000 of income on your tax return and $90,000 of income on your credit card application, you have a better chance of getting caught than if you claim $10,000 and $12,000, respectively.
But the application and underwriting process for credit cards has grown ever more sophisticated over time, and lenders — especially ones that you already have accounts with — can much more easily ferret out problematic data when you apply.
Theres also nothing preventing a lender from periodically reviewing your account even after youve been approved.
Do Credit Card Companies Verify Income to Check for Lying? What to put for income on an application?
FAQ
How does a credit card verify your income?
Card issuers sometimes ask you to verify your income, which you may be able to do by submitting copies of income-related documents, such as a tax return or pay stub. Alternatively, you might be able to let the card company call the IRS to confirm your income.
What happens if you put wrong income on a credit card application?
Providing incorrect income information on a credit card application is considered fraud and can lead to serious consequences. It can result in legal penalties, including fines or imprisonment, if discovered.
How do credit lenders verify income?
These documents can include an employment verification letter, recent pay stubs, W-2s, or anything else to prove an employment history and confirm income.
Can I get a credit card with a $5000 salary?
Although some credit card providers may set this limit at 18 years, the standard age requirement as per most banks is 21 years old. You must have a minimum monthly salary of AED 5,000. You must either be a salaried individual or a self-employed individual.