Accessible Income, as the name suggests, is the amount of total annual income you have REASONABLE access to if you’re aged 21 years or older. This does not just include your income from your employment but all sources, including social benefits. Accessible income plays a significant role in getting better credit cards.
The Credit Card Accountability Responsibility and Disclosure (CARD) act of 2009 sets the standards for credit lending. The act requires creditors to only assign you a line of credit if you have the ability to pay your bill. If you don’t have the appropriate means and resources, your credit limit could be small or your application for a credit card could be outrightly declined.
The term reasonable access to income, has a particular definition. If you’re below the age of 18, the accessible income would include your personal income, allowances from parents (usually), grants and scholarships. Once you turn 21, you can report more as accessible income and the more the sources of income, the better for your credit card application.
These generally include the following:
- Employment Income
- Passive Income
- Social Security
- Savings Accounts
- Tips and Gifts
- Retirement Funds
- Trust Funds
- Financial Aid
- Spousal Income
How to Report Accessible Income on a Credit Card Application
You have to report accessible income as the total sum of income from all of your equity. Normally, creditors simply take your stated accessible income as it is but in some cases they might use an income modeling algorithm to estimate your accessible income or ask you to verify it yourself with tax returns and other documents according to Natalie Daukas of Experian.
It is noteworthy here that you cannot list other sources (if any) of credit as income because liabilities do not count as income. Although there’s no law that prevents you from doing it, income from debt goes against the very spirit of the “ability to pay” clause in the CARD act and could end up hurting your finances.
What Happens If Your Estimated Accessible Income is Off
If you’ve exaggerated your accessible income and it gets estimated by creditors’ own income modeling algorithms, they still might approve your credit card application but set you for a lower credit limit that is proportionate to the income estimates according to their models. Or worse, they may decline your application altogether.
However, if you deliberately falsify information related to your accessible information and the creditors can later prove it in a court of law, your credit card debt might become ineligible to be discharged in a bankruptcy situation According to Scott Maurer who teaches consumer law at Santa Clara University.
So it pays to be honest.
How Much Does Income Matters for Credit Card Applications
Employment Income has a moderate influence on your credit card application. If you’re applying for premium cards like Chase Sapphire Reserve then low income may disqualify you from obtaining the credit card. But it’s not much of a problem for regular credit cards. Still, income helps in getting a higher credit limit. This is where accessible income comes into play and can be crucial for getting you a decent credit limit even if your disposable employment income is low.
However, if your income is low but you have a good credit history and credit score, you should not have much of a problem in getting a good card.
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