whoknowsme2001 t1_jeff9gk wrote
A few concepts to understand.
A credit card application will normally take one’s stated income. So you’re free to put whatever you like.
That information will still be reviewed (likely electronically) and if you’re technically not employed then that would usually result in the application declining.
You can put your source of income as investments but if the file gets to underwriter review they may want some sort of proof of this investment income. As dividends and capital gains are not guaranteed then they may not consider it as reliable income.
Typically a credit card company wants to see 2 years of consistent income in the same line of work.
Having significantly large assets may help to combat this issue, but if the creditor you’re applying with has no relationship with you then they have no way of knowing those assets exist.
It may be best to work with your bank or broker where the assets are held and see if they have some sort of affluent segment/customer program. They’ll likely be able to get you a card this way since they know you have the resources to support the debt.
As a last note. Under underwriting terms some forms of income are actually increased to more than their actual number. Not all types of income receive equal tax treatment. Social security benefits are tax exempt in some cases, municipal debt income can also be tax exempt, Roth IRA withdrawals, structured insurance settlements, life insurance loans used as income, child support isn’t taxed, and qualified dividends are taxed lower than income. In some of these cases a lender may calculate what the earned income equivalent of these assets is and apply that number towards qualification.
DrRobertBottle OP t1_jefjr6a wrote
Thank you. This is my understanding as well. What would you self report on the credit card application?
To expand on your comment that they electronically verified income, it sounds like they will pull your credit report and look at how much you spend per month on your credit cards and other loans to estimate your monthly expenses and then look at how much you pay down on those to estimate your income. I'm imagine their model is robust but that is the data plus estimating your housing cost that they will look at.
It feels like you can put any value in that income field if you feel you can defend your position if they question you about it. So, I'm leaning towards answer A.
Applying for a mortgage is very different than applying for a credit card. In my situation, I have talked to banks and they aren't interested in underwriting me with a typical mortgage since my income that I report on my taxes is so variable. I do qualify for asset based mortgages which tend to have a higher interest rates.
As a side note, I have been unemployed and still successfully gotten credit cards. I think it's combination of my passive income and having a credit score that hovers around 840.
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