topic Re: Income on credit apps in Credit Cards

Income on credit apps

krial — Wed, 01 Jan 2014 03:55:25 GMT

So I'm self-employed and I don't make a whole ton of money. If I gross about $90k in sales, but after stock and other expenses I'm only actually netting $14k profit, what do I list for income? I always put $14k on my credit card apps, which leaves me with obviously small limits -- this is rather annoying when I can easily put $7k per month through the card and it has a $1k limit.

Am I doing it wrong? LOL. Should I be putting the $90k instead of the $14k? Or if I have been doing it correctly, do you think a call to an analyst to explain and fax over a profit/loss statement or some tax docs would get me a more useful limit?

Re: Income on credit apps

Anonymous — Wed, 01 Jan 2014 04:06:09 GMT

Hi krial,

I don't have an answer for your question, but I do have a question for you. I see you have a Barclaycard. Are you happy with it? How long have you had it?

Re: Income on credit apps

krial — Wed, 01 Jan 2014 04:11:06 GMT

Had it for a couple of months. I'm very happy with it, and the 2% cash back actually categories apply to more random places than it says (for example, the local pharmacy).

Only thing I'm not happy about is they silently, sneakily and stealthily removed from my terms of service the sentence about the $25 bonus for making a purchase when they approved me. Everything else was spot on for what I applied for except for that. It's the world's smalles bonus anyway and doesn't matter, but it still feels like a slap in the face!

Great card though, regardless. Hopefully it grows with me.

Re: Income on credit apps

Anonymous — Wed, 01 Jan 2014 05:12:39 GMT

Thanks for the info

Re: Income on credit apps

chwebb1 — Wed, 01 Jan 2014 05:16:44 GMT

I believe you would put the 90k on there, since it asks for income, and not profit.

Re: Income on credit apps

Moleman_H — Wed, 01 Jan 2014 09:27:55 GMT

If they ask for income, the 14k in profit is what they care about (since the 76k in business expenses out of the $90k business revenue are not available for paying back any CC debt you might accumulate).

Look at line 22 of your 1040 (total income).

Re: Income on credit apps

indiolatino61 — Wed, 01 Jan 2014 07:01:51 GMT

@krial wrote:
So I'm self-employed and I don't make a whole ton of money. If I gross about $90k in sales, but after stock and other expenses I'm only actually netting $14k profit, what do I list for income? I always put $14k on my credit card apps, which leaves me with obviously small limits -- this is rather annoying when I can easily put $7k per month through the card and it has a $1k limit.

Am I doing it wrong? LOL. Should I be putting the $90k instead of the $14k? Or if I have been doing it correctly, do you think a call to an analyst to explain and fax over a profit/loss statement or some tax docs would get me a more useful limit?

Interesting question...some would say input the $14K, since that is your net income. However, most everyone inputs their gross wages, not their take-home pay. IMO, if you are using the card for business expenses and are PIF all the business's expenses, I don't see anything dishonest in inputting the $90K. As long as all of your sales are balanced with your card PIF payments, there should be no issues for you. Some would say what if your sales dwindle? Yes, but anyone can also be laid off or have reduced hours. It seems that whatever you decide, there is no "wrong" thing to do if viewed equally from both sides.

Re: Income on credit apps

compassion101 — Wed, 01 Jan 2014 07:27:11 GMT

You should apply for a business card.

The 14k is your income. 90k is business revenue, not gross pay as someone stated above. You have a legit business with 90k revenue, if you can prove it you may be able to get a decent business card.

Re: Income on credit apps

efranklin23 — Wed, 01 Jan 2014 07:57:11 GMT

@compassion101 wrote:
You should apply for a business card.

The 14k is your income. 90k is business revenue, not gross pay as someone stated above. You have a legit business with 90k revenue, if you can prove it you may be able to get a decent business card.

Re: Income on credit apps

Revelate — Wed, 01 Jan 2014 08:23:09 GMT

Business card is different than personal, and I agree that the 90K gross is more applicable there.

Fact is whatever is not being claimed as taxable income (I'm assuming this is a sole proprietorship?) is technically and I suspect legally not valid to be put on a personal credit card application. Someone's statement of simply claiming the taxable income from your 1040 was correct in this instance.

Re: Income on credit apps

Anonymous — Wed, 01 Jan 2014 12:34:04 GMT

There are standard ways of coming at this, for example considering the amount transferred from Schedule C on your tax return to the 1040 form. This amount is typically gross business income minus expenses.

If you can easily put $7K on the card in a month, then it sounds like either you're referring to business expenses here, or there's something odd about the $14K income figure.

If it's $7K in business expenses, then I'd recommend a business CC like Chase Ink.

Re: Income on credit apps

RushXTC — Wed, 01 Jan 2014 13:37:37 GMT

@chwebb1 wrote:
I believe you would put the 90k on there, since it asks for income, and not profit.

^^ This.

If I had a side business, I wouldn't factor out the expenses, Because the sales are your income.. Even if it's not 100% profit.

Re: Income on credit apps

Anonymous — Wed, 01 Jan 2014 14:27:02 GMT

This issue ties in with proof-of-income (POI) for self-employed people.

In contexts where POI is required, for example mortgage applications and CC applications from CUs, a typical request is for two years of tax returns. Taxable income on Form 1040 is derived from what is on Schedule C or a similar business form.

A self-employed person can deduct business expenses on Schedule C, whereas a regular W-2 employee cannot deduct routine expenses such as the cost of travel to a place of employment. So the same income for these two individuals is not comparable.

One of the problems with providing gross business income on a personal CC application is that this might be considered a misrepresentation, of the sort that can land a person in legal trouble. Providing tax returns to a CU gets around this issue. It's possible that a business CC might handle all of this differently.

Here's an article that touches on some these issues.

http://ezinearticles.com/?Self-Employed-Mortgage-Loan---Getting-a-Mortgage-When-Youre-Self-Employed&id=26089

Re: Income on credit apps

scenery_guy — Wed, 01 Jan 2014 15:04:18 GMT

Might not be what you want to hear but take a peek at the application screen shot I attached. It's pretty clear what they are looking for on this application. You might be able to get away with adding the gross sales under "other income" but I would not recommend doing it that way.

You are a perfect candidate for business cards. Embrace it. Chase offers great products for small business. So does AMEX. Citi has some as well. The added perk for business cards is that they don't show on your personal report so UTL does not matter. I routinely let balances post on business cards but always PIF monthly to avoid interest.

Remember they are still a HP on your personal reports so do your research and make sure it's a keeper. Most of the time the limits are as good or better than personal cards.

Stop in at the business credit area and post questions if you have some. We would be glad to help.

Re: Income on credit apps

phonic — Wed, 01 Jan 2014 16:37:47 GMT

Along the same topic, I was wondering what people's opinions were about personal vs household income. Most applications I've seen only ask for 'income' and don't specify. I read in various threads where people have asked the CSRs and gotten different answers. Normally, I give household since we file a joint return, each have cards on the others' accounts and the income figure specified is valid for amount available for repayment of the charges on the card(s).

Re: Income on credit apps

Moleman_H — Wed, 01 Jan 2014 19:12:13 GMT

Household vs Personal is a whole big topic on its own. Some banks started allowing household income again for people over 21 (usually phrase it as "income you can reasonably expect to use to pay back debt" or similar): http://www.consumerfinance.gov/newsroom/the-cfpb-amends-card-act-rule-to-make-it-easier-for-stay-at-home-spouses-and-partners-to-get-credit-cards/

If you live in a community property state, then I think it was legitimate to enter your spouse's/partner's income anyway. But that part has been open to debate.

On the business revenue of sole propriators vs personal income: revenue never makes sense in these applications. The question is asked to assess your ability to repay debt. Revenue has nothing to do with it since it can be arbitrarily increased (Take out $10k from your CC and start selling $100 notes for $99; you'll have a $1M revenue business really fast. Should you get a $100,000 personal CL? No... Since at the end of it, you lost the $10,000 and won't be able to repay the CC company even the $10k. Your income was negative in this venture).

Re: Income on credit apps

phonic — Wed, 01 Jan 2014 18:34:13 GMT

@Moleman_H wrote:
Household vs Personal is a whole big topic on its own. Some banks started allowing household income again for people over 21 (usually phrase it as "income you can reasonably expect to use to pay back debt" or similar): http://www.consumerfinance.gov/newsroom/the-cfpb-amends-card-act-rule-to-make-it-easier-for-stay-at-home-spouses-and-partners-to-get-credit-cards/
If you live in a community property state, then I think it was legitimate to enter your spouses/partners income anyway. But that part has been open to debate.

Thanks for the info. Since the CFPB's amendments to the Card Act are in fact law, doesn't that mean that all banks have to consider spousal income? You mentioned that "some banks" allow it, but I would think that they all need to if that is what the law states. In our case, both my wife and I have very good credit and high incomes, but it always looks better if you can combine.

Re: Income on credit apps

Moleman_H — Wed, 01 Jan 2014 19:18:18 GMT

Quote from the change (emphasis mine):

"The final rule amends Regulation Z to remove the requirement that issuers consider the consumer’s independent ability to pay for applicants who are 21 or older, and permits issuers to consider income and assets to which such consumers have a reasonable expectation of access."

One more thing: There technically still is a difference between household income and the "available income" that is now permitted. You may be in a household with someone but still not have access to that person's income or all their income.

Re: Income on credit apps

FinStar — Wed, 01 Jan 2014 21:40:45 GMT

@phonic wrote:
@Moleman_H wrote:
Household vs Personal is a whole big topic on its own. Some banks started allowing household income again for people over 21 (usually phrase it as "income you can reasonably expect to use to pay back debt" or similar): http://www.consumerfinance.gov/newsroom/the-cfpb-amends-card-act-rule-to-make-it-easier-for-stay-at-home-spouses-and-partners-to-get-credit-cards/
If you live in a community property state, then I think it was legitimate to enter your spouses/partners income anyway. But that part has been open to debate.

Thanks for the info. Since the CFPB's amendments to the Card Act are in fact law, doesn't that mean that all banks have to consider spousal income? You mentioned that "some banks" allow it, but I would think that they all need to if that is what the law states. In our case, both my wife and I have very good credit and high incomes, but it always looks better if you can combine.

The amendment simply permits them to consider it going forward, some will, some will not. The lender is not required to consider it though.

Re: Income on credit apps

masscredit — Thu, 02 Jan 2014 03:37:52 GMT

Owned my own business and did about $3 million in sales. That wasn't considered my income. My income was after all expenses (product, operating expenses, payroll ect). There might be personal things that you are able to right off such as travel, trucks, "office supplies" ect... It's yours but it's business but it's yours. I used to just round my income to about $120k. They never asked for proof and seeing that I showed about $10k per month in personal expenses, it showed that I was making the money to cover them and then some.