Debunking credit card myths: Does your income impact your credit score?
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Editor’s note: This post has been updated with new information.
We talk about travel credit cards quite a bit here at TPG. Applying for and utilizing these cards strategically can unlock incredible travel experiences like premium class flights or luxurious hotel rooms. However, there are a number of misconceptions out there when it comes to credit cards, so we’re debunking some of these myths in a series of posts.
Want more credit card news and advice? Sign up for TPG’s daily newsletter
Myth: My income affects my credit score
When you apply for a new card, the application page will always ask for your income. On the surface, this seems like a pretty obvious request. After all, why would an issuer want to extend a huge line of credit to a student without a full-time job? This leads many to assume that your annual income must have an impact on your credit score.
This is actually not the case. While it’s true that an issuer will look at your reported income when considering whether to approve or deny your application, your actual credit score has nothing to do with how much money you make in a given year.
There are five main factors that contribute to your FICO score, the one most frequently used to determine creditworthiness:
- Payment history
- Amounts owed
- Length of credit history
- New credit
- Types of credit used
Related: How credit scores work
Notice that none of those categories have any connection to your annual income. Instead, each one relates to how well you have managed the various lines of credit that have been extended to you (or attributed to you, in the case of accounts on which you are an authorized user) over your lifetime.
Remember that your credit score is a reflection of your creditworthiness, so whether you’re making $50,000 a year or $500,000 a year is irrelevant in the grand scheme. What matters most is how well you manage your credit.
In addition, when you apply for a new credit card, that issuer has no way of actually checking how much you make in a given year. Even if you list your employer on the application, the issuer can’t access payroll records, and if you hold side jobs or have other income like dividends or capital gains, those wouldn’t be included either. The income you report is just one element in determining whether or not you’ll be approved for the new card. Generally speaking, the annual income number will only potentially impact the credit limit you wind up getting.
This topic is really important for two different groups of readers:
- Those with limited income: Many of you may be new to the points-and-miles hobby (or the workforce in general) and are worried about applying for a credit card with a lower income. Don’t be! I’ve read many reports of full-time students with almost no income getting approved for new cards. Just don’t expect a whopping credit limit, and I’d probably wait to try to go for a premium travel rewards card.
- Those with high income: If you’re a reader with a large annual income, don’t think that you have a blank check to do whatever you want when it comes to credit cards. Even if you make a million dollars a year, you could wind up with a low credit score if you don’t manage your payments and balances effectively.
Your credit score is a critical piece of the puzzle when it comes to applying for new travel rewards credit cards, and many individuals think that their yearly income has an impact on their score. Fortunately, that is not the case, as you can be a low-income credit card holder with a credit score in the 800s.
However, you can also be a high-income cardholder with a score in the 500s. At the end of the day, it all comes down to how well you manage the lines of credit that have been extended to you, not how large of a paycheck you’re cashing each pay period.
Featured by Rattanakun Thongbun / EyeEm/Getty Images.
Additional reporting by Madison Blancaflor.
Welcome to The Points Guy!
WELCOME OFFER: 80,000 Points
TPG'S BONUS VALUATION*: $1,600
CARD HIGHLIGHTS: 3X points on dining and 2x points on travel, points transferrable to over a dozen travel partners
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®.
- Enjoy benefits such as a $50 annual Ultimate Rewards Hotel Credit, 5x on travel purchased through Chase Ultimate Rewards®, 3x on dining and 2x on all other travel purchases, plus more.
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
- With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories
- Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.