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Debunking credit card myths: Does your income impact your credit score?

Jan. 29, 2021
4 min read
Debunking credit card myths: Does your income impact your credit score?
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Editor's Note

/strong> This post has been updated with new information. 

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.

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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.

(Photo by wutzkohphoto/Shutterstock.)

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.

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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.

Related: TPG’s 10 commandments of rewards credit cards

(Photo by Maskot / Getty Images)

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.

Related: A college student debunks these 5 credit card myths

Bottom line

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.

Featured image by Getty Images/EyeEm
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
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TPG featured card

Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

2 - 10X points
10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day

Intro offer

75,000 bonus miles
Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

Annual Fee

$395

Recommended Credit

740-850
Excellent
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023
Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day
  • Intro Offer
    Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

    75,000 bonus miles
  • Annual Fee

    $395
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,400+ lounges, including Capital One Lounges and our Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023