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How do you answer credit card application questions such as monthly spending, housing payment, annual income, and total available assets?
These seemingly straightforward requests can have hidden wrinkles that make it challenging to provide the correct response.
It is always best to provide honest, accurate answers. The truth will come out if the bank places your credit card application under review to verify your answers before making a final decision.
The information you provide supplements data obtained from your consumer report. Your answer can make or break getting approved – and, most importantly – being able to manage the new account responsibly.
When completing a credit card application, many people are confused about what to put for their monthly housing payment. You are not alone if you need clarification on this question.
Banks ask the “rent, own, or other” and related questions to estimate your free cash flow – the amount of your net income left over after paying fixed expenses. Approvals have more, while denials tend to have less.
Table Of ContentsIf you completely understand the monthly housing payment definition, you will be better prepared to input the correct information on your credit card application.
The monthly housing payment means the fixed costs you incur each period to live in your principal residence, which you might rent or own.
Issuing banks recognize that borrowers will prioritize their fixed monthly housing payments over their unsecured credit card obligations during financial hardship. People fear homelessness more than wage garnishment and will default on unsecured obligations before a mortgage or apartment lease.
Tenants who share an apartment with roommates should report the split rent as their monthly housing payment answer. Credit card applications ask about your fixed expenses, not the other people’s obligations in your rental unit.
Most property managers and apartment leases hold the roommate personally accountable for their share of the monthly rental payment. It is common for landlords to pull a consumer report for each co-tenant and then require co-signers (from parents) when needed.
Rental security deposit loans operate under similar underwriting principles.
Consumers do not need to include utilities in their monthly housing payment response because credit card applications do not ask about variable expenses. Each month, the amount allocated to pay the gas, electric, and water bills goes up and down.
Free grant money for bills and personal use can lower your utility charges. Plus, changes in the weather and your choices can have a profound effect.
If you live with your parents, you should put rent or other rather than own on your credit card application. The monthly housing payment should reflect what your parents charge you to reside in their basement or your old bedroom.
Most people should put their annual net income on their credit card application, representing their gross earnings minus deductions for taxes, health insurance, and retirement savings.
In other words, the credit card companies want to see how much money is available to pay them at the end of each billing period. Therefore, you should include every possible source.
The answer to what to put for income on credit card applications for college students is more complicated. Therefore, pay close attention to avoid problems in the future – when the bill comes due.
First, student loans do not count as income. Loans are a debt you must repay, appearing on your consumer report. However, you can report any excess funding borrowed to pay living expenses as an asset, albeit temporarily.
Second, the portion of student financial aid that does not cover coursework (tuition, textbooks, and fees) counts as income. You can include support such as stipends and money earned by working.
Third, students can include “accessible income,” which has different rules based on age.
A 2013 update to Regulation Z answers stay-at-home-mothers (SAHM) on what to put down for income on credit card applications. SAHM have essential jobs but might not earn money outside of the home.
Emergency loans for stay-at-home moms often follow similar principles laid out by the Regulation Z revisions designed to minimize default while allowing marginalized groups access to credit.
“Accessible income” could include any earning sources funded by a non-applicant.
The answer to total available assets for credit card applications might surprise you. With this question, the banks are trying to measure the size of your safety net – the resources you can tap into during a financial emergency to stay current on your monthly payments.
When applying for a credit card, total available assets are the liquid resources at your disposal. Liquid assets are property you can quickly convert into cash without losing substantial value.
Examples of liquid assets include cash, stocks, bonds, certificates of deposits, and shares held in bank or investment accounts.
Consumers can easily tap into their liquid assets during financial hardship to pay their credit card bills, avoiding delinquency or default.
It is better to omit illiquid assets from a credit card application as they do not count towards the total available resources. You can sell illiquid assets and convert them to cash, but often at a substantial loss during a financial emergency.
Examples of illiquid assets are your house, car, boat, jewelry, musical instruments, and artwork. Still, they can also include other costly resources to convert into cash quickly.
Many banks will ask you approximately how much you will spend each month with this credit card. In this case, they want to estimate your revenue potential and choose an appropriate account limit.
The best answer to the monthly spending with credit cards is an honest estimate consistent with your responses to earlier questions. The amount should be reasonable given your free cash flow: income minus fixed expenses.
For instance, suppose your monthly income is $5,000, and your fixed housing costs consume $1,400, leaving you with $3,600 to fund other living expenses.
The back-end debt-to-income ratio for an auto loan might be 36%, meaning your fixed car payment consumes an additional $400 each month (28% for housing plus 8% for the vehicle), leaving you with $3,200 to fund variable costs for gas, utilities, groceries, etc.
In this case, the best response might be to pick a spending number in the mid-range of your free cash flow after fixed expenses, or $1,600.
The worst answer to the monthly spending with this credit card is wildly inconsistent with your earlier responses to the income and housing questions. In other words, you do not want to be too high or low.
Once again, suppose your monthly income is $5,000, and your fixed housing costs consume $1,400, leaving you with $3,600 to fund other living expenses.
