About Reporting Income

One required field on a credit card application is your total gross annual income. This can include all income you may receive, such as full-time, part-time, and internship wages, investment dividend income, and government benefits. You may also be able to include money that other people send you or bills they pay on your behalf. Income is an important factor banks use to decide whether to approve your credit card application, and it is also a key factor in determining your credit limit.

For international students, if you are a self-funded undergraduate or master's student and do not have an on-campus job, your income is usually very limited. As a result, you may be at a significant disadvantage when applying for credit cards, and it may be difficult to get approved even for some no-annual-fee cards. Even for PhD students with some income, a monthly income of just $1,000 to $2,000 may still not be enough to support an application for certain premium credit cards. For example, Chase Sapphire Reserve may require you to qualify for a credit limit as high as $10,000 before your application can be approved. If your annual income, after rent, is less than $3,000, the bank may not approve a credit card with a $10,000 limit for you. Likewise, if you already have a $3,000 credit limit with a bank, that bank may not approve another new card for you.

Because of this, many points-and-miles enthusiasts now like to report a higher income than they actually have. First, doing so may make it easier to get approved for additional credit cards from the same bank. Second, a higher credit limit can make it easier to complete minimum spending requirements for welcome offers. You do not have to keep making payments constantly; instead, you can finish the spending requirement and then pay it off all at once. On the bank’s side, in most cases it will not ask you to provide proof of income or last year’s tax return. Usually, it simply assumes the income you entered is accurate, and then decides whether to approve your application and what credit limit to give you.

But if you overstate your income on a credit card application, can that cause problems, especially legal problems? Let’s take a look.

Overstating Income Is Illegal!

Relevant Law (18 U.S.C. § 1014)

814. FALSE STATEMENTS (18 U.S.C. § 1014)

Section 1014 of Title 18, United States Code, covers the knowing making of false statements or willfully overvaluing any property or security for the purpose of influencing in any way the action of the enumerated agencies and organizations.

Venue is governed by the general rule under the various false statement and false claim statutes. See United States v. Blecker, 657 F.2d 629, 632 (4th Cir. 1981) , cert. denied, 454 U.S. 1150 (1982) (false claim statute). A violation of section 1014 is indictable either in the district in which the false statement is prepared and mailed, or in which the statement is received. See United States v. Wuagneux, 683 F.2d 1343, 1356 (11th Cir. 1982) , cert. denied, 464 U.S. 814 (1983) .

Generally, the making of a number of false statements to a lending institution in a single document constitutes only one criminal violation under section 1014. See United States v. Sue, 586 F.2d 70, 71 (8th Cir. 1978) . See also United States v. Thibadeau, 671 F.2d 75, 79 (2d Cir. 1982) . However, in Bins v. United States, 331 F.2d 390 (5th Cir.) , cert. denied, 379 U.S. 880 (1964) , the court of appeals found duplicity in an indictment that charged the defendant in each count with making false statements on two different FHA forms. In United States v. Canas, 595 F.2d 73, 78 (5th Cir. 1979) , the United States Court of Appeals for the Fifth Circuit distinguished Bins and found that an indictment can properly charge in a single count false statements made on different documents as long as the documents are necessary parts of a loan package meant to obtain a single loan.


Put simply, when applying for a credit card, which can be treated as a type of loan, providing false information such as fake income can violate the law.

Case 1

Rochester Man Sentenced for Loan Application Fraud

U.S. Attorney’s OfficeNovember 19, 2012
Western District of New York (716) 843-5700

ROCHESTER, NY—U.S. Attorney William J. Hochul, Jr. announced today that David P. Gaylord, 52, of Rochester, New York, who was convicted of bank loan application fraud, was sentenced to time served and five years’ supervised release and ordered to pay $46,914.73 in restitution by U.S. District Judge Charles J. Siragusa.

Assistant U.S. Attorney Tiffany H. Lee, who handled the case, stated that in 2006, while residing in the Western District of New York, the defendant submitted various credit card applications to Advanta Corp., Bank of America, and Family First Federal Credit Union. Gaylord knowingly provided false information regarding his income in order to obtain lines of credit from the banks and credit union. The defendant indicated that his income was anywhere between $90,000 to $122,000 when, in 2006, he reported to the Internal Revenue Service that his income was approximately $12,488. Gaylord ended up leaving outstanding balances on the various lines of credit and filed for bankruptcy.

The sentencing is the culmination of an investigation on the part of special agents of the Federal Bureau of Investigation, under the direction of Special Agent in Charge Christopher M. Piehota.
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Gaylord knowingly provided false information about his income in order to obtain lines of credit from banks and a credit union. Although he reported to the IRS that his income in 2006 was about $12,488, he listed income between $90,000 and $122,000 on his loan and credit card applications. Gaylord ultimately left unpaid balances on the various lines of credit and filed for bankruptcy.

This is a very typical case of applying for a bunch of cards, not paying them back, and then filing for bankruptcy.

Case 2

Loan Fraud Defendant’s Lies and False Documents Qualify Him for Five Years in Prison

Evidence at trial showed that Raymond told extraordinary falsehoods about his finances. For example, he claimed that his income ranged from $308,841 to $543,933; in fact, his true income was only a fraction of these amounts. To support his false claims he submitted fraudulent tax returns that appeared to have been filed with the IRS. At trial, the government proved that the file stamps on these tax returns were completely fabricated, and that the returns had never been submitted to the IRS.

Raymond also submitted forged bank and brokerage account statements to support his Bank of Escondido application, showing balances close to $400,000 in each account. In fact, the balances in these accounts were substantially lower, with one account even having less than $100.

DEFENDANTS

  • Solomon Gordon Raymond (a.k.a. Paul Anthony Raymond )
  • Age: 54
  • Golden Valley, Minnesota

SUMMARY OF CHARGES

  • Four counts of False Statement in a Loan and Credit Application, in violation of 18 U.S.C. § 1014.
  • Maximum penalty: Thirty years in prison, $1,000,000 fine, restitution, and $100 special assessment, per count.、

AGENCIES

  • Federal Bureau of Investigation
  • Small Business Administration Office of Inspector General
  • Social Security Administration Office of Inspector General
  • Treasury Inspector General for Tax Administration

Likewise, some people lie on credit card applications by reporting income far higher than what they actually earn, and may even submit falsified IRS tax returns (Tax Return).

From this case summary, we can see that the FBI may get involved in investigating this type of case, and IRS tax returns can be used as evidence of a person’s true income.

From the Applicant’s Perspective

After reading the two cases above, if you have ever exaggerated your income, are you too nervous to eat now? Is it really that scary?

In fact, in both cases above, the individuals obtained large amounts of loans, later became unable to repay them, and ended up in bankruptcy, which then led to the discovery of various falsified income information. If you previously misstated information but did not cause any serious consequences, or if you always paid on time, naturally the FBI would not get involved to investigate you. If you only overstated income to get approved for a credit card and then used the card normally afterward, in practical terms your situation may not look much different from that of an ordinary cardholder. In my personal view, even if it went to court, a jury would not so easily conclude that you were guilty. Of course, this is not encouraging anyone to misstate income, because whether or not it leads to serious consequences, it is still illegal. If your goal is simply to get a higher credit line, max things out, and then leave the country or file for bankruptcy, sooner or later you may be investigated and prosecuted.

In addition, banks do leave a little room in how income is reported. For example, when applying for a Chase credit card, the income field may ask for your current income or expected income, and it may also include various categories of funds, including money you receive from family members. Technically speaking, if you slightly increase your expected income and that helps you qualify for the card, that may still be somewhat understandable. Of course, I personally would not recommend reporting income that is too high, because an excessively high credit line often gives you more “room” to commit wrongdoing...

From the Bank or Credit Card Issuer’s Perspective

From the bank’s perspective, banks rarely verify your actual income directly. Income information is generally not public, and only the IRS has relatively accurate records. So when you fill out an application, banks usually assume the information you provide is true. Some banks may ask for additional details, such as your occupation or employer, and can use that information to roughly judge whether your reported income range seems reasonable. The bank’s goal is to control lending risk (a credit card is also a type of personal loan), not to investigate whether you have committed a crime. So today, banks rely on your credit report and can use your credit profile to estimate your risk level. For example, if you already have a credit card from another bank with a $5,000 credit line and have always paid on time, then approving you for a new card with a $2,000 credit line would not be very risky. On the other hand, if your credit report is full of problems, with unpaid debts and multiple recent Hardpulls, the bank will naturally view you as too risky and may decline to issue you a new credit card.

Your relationship with a bank is not just a one-time transaction. During the time you use a credit card, the bank is constantly monitoring your risk. In addition to periodically doing a Soft Pull on your credit report, it may also evaluate your spending and income to judge whether you are at risk of being unable to repay. If your risk appears too high, the bank may seriously investigate your income. For example, an AMEX Financial Review is a very strict review process that may require you to submit forms authorizing AMEX to obtain your prior-year income information from the IRS. AMEX may then adjust your credit line or even shut down your card based on your income situation. Chase has similar Review practices as well, though they generally do not escalate to the IRS stage.

In addition, banks often ask you to update your income information. On the one hand, they can use a higher reported income to grant you a higher credit line and encourage more spending; on the other hand, if your income drops significantly, they can reduce your credit line in time to limit risk.