Applying for a credit card can be daunting. After all, you don’t know for certain whether you’ll be approved or what your credit limit will be. Credit card issuers base their credit card decisions on several factors, one of which is your income. There is no minimum yearly income to qualify for a credit card. The card issuer will look at whatever your gross income is and include that information in their decision.
How Your Income Impacts Credit Card Approval
Although your income isn’t the only factor in whether you’re approved for a credit card, it’s one of the most important. The credit card issuer needs to be confident that you can pay your credit card bill. The lower your gross income is, the lower your credit line will be in order to ensure you can pay off your card. You can include any household income that you have access to when you report your gross income.
Rules Regarding Income
The Credit Card Accountability Responsibility and Disclosure Act of 2009 introduced income requirements for those age 21 and younger. If you’re under age 21, you must have verifiable income, either through employment or through a co-signer age 21 or older, in order to be approved for a credit card. If you’re age 21 or older, you don’t need to be employed if you have access to other income, such as the salary of a working spouse.
Other Factors in Credit Card Decisions
Your credit score is another factor in whether you qualify for a credit card. There are credit cards available for every category of credit score, from subprime to excellent. Look for a credit card that aligns with your credit score to improve your chances of being approved.
Another important factor is your debt-to-income ratio. This is the amount of the monthly payments you make on your debt divided by your monthly gross income. If you have $5,000 per month in gross income and you make credit card and car payments that add up to $1,000, you would have a debt-to-income ratio of 20 percent. The lower your debt-to-income ratio, the better. If your payments are too much of your income, credit card issuers may be concerned about your ability to pay and decline your card application.
Credit card issuers will also review your credit history. The longer you’ve had accounts open and in good standing, the better. They will also look at any delinquencies as well as any bankruptcies in your history. These won’t necessarily keep you from getting a credit card, but you may have a lower limit and higher fees.
- Credit Karma: Credit Card Approval: What Factors Matter?
- Creditcards.com: What Types of Income Qualify on Card Applications?
- Credit Karma: Understanding Your Debt to Income Ratio
- Bankrate: How Issuers Determine Credit Card Limits
- Creditcards.com: 12 Consumer Protections in the Credit CARD Act
- Next Advisor: What Factors Affect My Ability to Get a New Credit Card?
Melinda Hill Sineriz is a freelance writer with over a decade of experience. Her work has appeared on Pocket Sense and Sapling. She specializes in business, personal finance, and career writing. She has worked in insurance sales and financial planning, helping families to manage their money and prepare for the future. Learn more about her and her work at thatmelinda.com.