Is it okay to under-report my income when applying for a credit card?

Question

I want to apply for a store-branded credit card that offers extra rewards for purchases made at that specific store. I have no intention of using this credit card elsewhere, I intend to pay it off in full each month, and I don't need nor want a high credit limit. (I have other credit cards that provide enough credit for my needs, and I'd prefer to limit fraudulent charges even though I know I wouldn't be responsible for them.)

Is it okay to under-report my income in hope to get a lower credit limit? Or would doing so work against me if the credit card company notices that my reported income doesn't seem to fit with what my credit reports state?

Answer 1

Your credit report doesn't show your income, so you don't have to worry about a discrepancy if you under report. However, the bank probably will look at your existing credit lines and debts, and based on the income you report, determine if you can handle more, and if so, how much more. It's possible that you'll get closer to the credit limit you desire by under reporting your income, but there's also an increased (albeit small) chance you'll be denied outright. I'd recommend being honest, and if the limit ends up higher than you'd like, you could always call them up and ask them to reduce it. You could even preempt it by calling them before you apply to confirm you can lower the limit afterwards, or possibly even complete the application over the phone with your desired limit.

That being said, note that in general your credit score will likely end up being a little better if you keep the higher credit limit (because it lowers your overall utilization percentage). I can only think of two reasons to request (or wish for) a lower credit limit:

1. You believe that one of the authorized users will be tempted to overspend with a higher limit.
2. You believe that based on your other open lines, installment loans, and your income that a higher limit could preclude you from obtaining new credit in the future. (For example, as described in the first paragraph.) Admittedly, this is unlikely to occur for most people, and if it does happen it's easy to rectify (by closing or reducing any open line).

If it were me, I wouldn't go out of my way to lower a limit of one of my credit cards, but, the fact that you took the time to ask this question suggests that maybe you should, if simply for peace of mind.

Answer 2

Hmm, but unless you know the bank's formula for calculating a credit limit, this would be a big guessing game. You have little idea what credit limit the bank would give based on your real income or on your fake income. If you're hoping for a credit limit of, say, $3,000, how do you know that that isn't what the bank would give based on your real income, and by understating your income they'll give you only $1,000, which you'd consider too small? Or based on your real income they'd give you $20,000 and on your understated income they give you $10,000, which is still more than you want?

Far simpler, I'd think, would be to call the bank and ask what credit limit they'd give you, and if the number they give is too high, ask for a lower limit.

I wonder why you're worried about too high a limit. Reasons that occur to me are, 1. you're worried that some authorized user on the card, a spouse or child or whatever, may run up too many charges, or 2. you're worried that you don't have the self control and you yourself will run up too many charges.

Generally having a large credit limit is good for your credit score, because an important factor in your score is what percentage of your available credit that you're using. I recently applied for 3 new credit cards within a few months to take advantage of special offers (50,000 bonus miles on an airline card, etc). I was a little worried that getting several cards in such a short period would hurt my credit rating, but in fact it went up. Part of the formula is the percentage of available credit that you're using. By getting a bunch of new credit while having the same total debt, my utilization percent went down so my score went up. (And just by the way, one of the airline cards gave me a credit limit of $30,000! Like wow, do they really think that if I ran up $30,000 on a credit card that I could ever pay it back? I wouldn't lend me that much money!)

Answer 3

It used to be that American Express in particular did not ask for your income, only a statement that it exceeded "x". In days gone by people were uncomfortable even giving the bank their birth date and it was considered rude to ask.

Times have changed, but income is a "forward looking statement", and you should feel quite comfortable" rounding it down.

Bear in mind taken literally this can affect for credit limit for other products you have already opened with the same "badge".

Also bear in mind, the truly wealthy have engineered "income", they grow their wealth by other means.

Answer 4

Depends on the country, the card issuer can

1. impose discriminate interest rates
2. Reject the application if it deems too risky.

If you afraid card issuance bank attempt to push you their junk financial products, just fill up the application carefully and opt-out all those "product recommendation" checkboxes.