The Federal Reserve announced Friday that credit card issuers will generally no longer be able to request a cardholder's “household income” when evaluating a consumer's ability to repay debt.
Typically, it's quite common to see a section labeled “household income” on a credit card application.
And while credit card issuers don't normally verify income, they use this figure, along with your credit history, to determine eligibility.
This information also helps card issuers determine your credit line, whether it'll be say $5,000 or $50,000.
But going forward, card issuers will need to consider a consumer's individual income or salary, not their household's.
The Fed simply felt that “household income” was too vague, and doesn't really allow credit card issuers to evaluate a consumer's finances properly.
This makes sense, given the fact that a credit card holder may live with several people, but it is only the card holder who is accountable for the debt (unless someone else co-signs).
So really, the household's income doesn't carry all that much weight, especially once the main borrower falls behind on credit card payments.
That said, it might be all the more difficult to get approved for that no fee balance transfer or that platinum card you had your eye on.
Even if approved, expect a lower credit limit, one that is perhaps more in line with your actual salary, though unless income is actually verified, this doesn't mean a whole lot for those fudging the numbers.
And note that while your employment information will show up on a credit report, your salary will not.
So that, along with your credit score, will determine your approval and credit limit.
(photo: thetruthabout, CC)
Article comments
1 - Greg
That seemed odd to me when I applied for a credit card online - Why do they ask household income, not my personal income? I think it is good when they fix such obvious things at least.