Credit card issuers are in business to make money. To do this, they have to ensure they only give cards to applicants who will pay for the purchases they make with the card. Creditors use household income as one measure of a creditor's ability to repay any credit card loan.
Your annual household income is the total amount of income that all members of your household take in each year. However, this generally does not include people who are not part of your marital family, such as your parents or your spouse's parents, nor does it include renters or boarders, according to the Minnesota Department of Revenue.
Credit card applications include a variety of questions aimed at determining whether the applicant would make a reliable debtor. Along with your annual household income, the credit card issuer also wants to know about your history as a credit user. This information is contained on your credit report, and along with your combined household income is often used to not only determine if you get the card but also what credit limit the card company gives you, according to Credit Karma.
If you are married, you still need to include the combined household income of you and your spouse even if you don't sign up for a joint credit card. Though your spouse may not be on the card application, it is quite common for a spouse to add the other spouse as an authorized user, meaning your spouse will be able to use the card regardless of whether he applied for the account.
Combined household income includes income from variety of sources. Apart from you and your spouse's salary, other sources of income may include welfare benefits, emergency assistance payments, income from rental properties or other assets, military housing allowances or non-taxed income.
- Index Credit Card: Anatomy of a Credit Card Application
- Credit Karma: How a Credit Limit is Determined
- CapitalOne. "Secured." Accessed Feb. 4, 2020.
- Fingerhut. "Apply for Your Fingerhut Credit Account." Accessed Feb. 4, 2020.
- United States Code. "18 U.S.C. 1014 - Loan and Credit Applications Generally; Renewals and Discounts; Crop Insurance." Accessed Feb. 4, 2020.
- Consumer Financial Protection Bureau. "Comment for 1026.51 Ability To Pay." Accessed Feb. 4, 2020.
- Consumer Financial Protection Bureau. "Am I Responsible for Charges on a Joint Credit Card Account if I Didn’t Make Them?" Accessed Feb. 4, 2020.
- Consumer Financial Protection Bureau. "Building Credit From Scratch," Page 1. Accessed Feb. 4, 2020.
Roger Thorne is an attorney who began freelance writing in 2003. He has written for publications ranging from "MotorHome" magazine to "Cruising World." Thorne specializes in writing for law firms, Web sites, and professionals. He has a Juris Doctor from the University of Kansas.