What Does "Household Income" Mean?

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Celestine
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What Does "Household Income" Mean?

Postby Celestine » Sat Feb 18, 2012 12:44 pm

This has been bugging me for a while now.

What is "household income"?

Does it include everyone's income living on the same house/apartment unit or just your own?

Some credit card applications asks that question.

Some companies treat household income as everyone's combined income living on the same house/apartment unit. Is it also the same with credit/charge card lenders?
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Postby jeffysdad » Sat Feb 18, 2012 6:23 pm

In the world at large I would take "household income" to mean the income of all full-time occupants of the home. Why would cc company ask for this instead of "personal income" of applicant?

A child or nonworking partner of the home's income earner might want a card, and the bank/cc co. wouldn't want to exclude them from potentially becoming a lucrative customer.

Household income would at least be equal to individual income and possibly higher. A higher income would encourage an applicant to apply for an account and make it more likely that one is approved. Again, the cc co./bank wants to do more business.

I don't know for a fact that these are the reasons; I'm just speculating. Asking for only a cc applicant's income would exclude many people without incomes (but with access to others' incomes) from applying.

If anyone knows for sure why banks do this, it would be interesting to hear.
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Postby PlatinumAMEX94 » Sun Feb 19, 2012 1:48 am

Your household income refers to what you put on your Federal income taxes, your gross income. That is what is verifiable. If you are married and you report your spouse's income as well, THAT is when it includes your other household members. If you file single you can only include the income YOU earned. It is always off the account holder's social security number, not everyone in the family.

Unless that person has given you spending authority on their money, you can't claim it to pay your AmEx bill. (i.e. Power of Attorney for dying parent). You have to look at it from a legal standpoint, the banks can only go after the account holder, as that is the social security number on your account. The household members you want to include on your application are NOT asking for a loan/credit, ... you are, and that is who signed on the dotted line (or click I accept your terms and conditions).

I hope that helps.
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Celestine
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Postby Celestine » Sun Feb 19, 2012 8:05 pm

Thanks! They could have put those information on the applications for easier understanding of the "household income". It is confusing. And I think when you ask regular folks what is household income is you will get different answers from them.
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Postby DoingHomework » Mon Feb 20, 2012 1:37 pm

PlatinumAMEX94 wrote:Your household income refers to what you put on your Federal income taxes, your gross income. That is what is verifiable. If you are married and you report your spouse's income as well, THAT is when it includes your other household members. If you file single you can only include the income YOU earned. It is always off the account holder's social security number, not everyone in the family.


That's not completely correct. And applying your rule in many situation could actually be illegal.

In the case of a formal domestic partnership (gay or straight), the parties cannot file federal taxes as married. Yet in many states discriminating against them when issuing credit is illegal. Similarly, there is nothing to preclude a couple from listing their joint income as household income for a credit card in only one of their names.

In may case I live in a community property state. My Amex card is in my name. My wife has a card as well but the account is not a joint account. I am legally entitled to list our joint income since it legally and unseparably belongs to both of us. Yet her half of our joint income cannot be touched top satisfy my separate debts. This is well supported by case law in some state. Even the IRS has been unable to penetrate community property restrictions in certain states.

The point is, "household income" is not a legally defined term. You can interpret it any reasonable way you wish. But if you make unreasonable claims about it then you will be denied credit. And the specific meaning and validity of any claim would depend very much on the state and how income-producing assets are titled. The answer above is flat out wrong unless a whole lot of assumptions are made.

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Postby DoingHomework » Mon Feb 20, 2012 1:39 pm

Celestine wrote:Thanks! They could have put those information on the applications for easier understanding of the "household income". It is confusing. And I think when you ask regular folks what is household income is you will get different answers from them.


They can't put that definition on the application because it is incorrect and illegal in some states.

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Postby Celestine » Mon Feb 20, 2012 5:07 pm

DoingHomework wrote:They can't put that definition on the application because it is incorrect and illegal in some states.


Thanks for additional insight!

Let's shorten it to a specific application... since we are in the credit card forum... for credit/charge cards.... what should we do in the situation of credit/charge cards applications if household income is being required?

Should we write down the income earned by the individual or the combined income of everyone living under the same roof/address/house - i.e. parents and applicant; siblings and applicant; parents, siblings, and applicant; etc?
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Postby DoingHomework » Mon Feb 20, 2012 8:24 pm

Celestine wrote:Thanks for additional insight!

Let's shorten it to a specific application... since we are in the credit card forum... for credit/charge cards.... what should we do in the situation of credit/charge cards applications if household income is being required?

Should we write down the income earned by the individual or the combined income of everyone living under the same roof/address/house - i.e. parents and applicant; siblings and applicant; parents, siblings, and applicant; etc?


You should write down the combination of all income you are pledging to be available to pay the credit card. If you and your sister are applying jointly then you combine your income. If mom and dad are also cosigning, include theirs as well. If questioned about it though you better be able to provide documentation of that income. Normally a creditor will ask for a tax return. But since not all income is required to be shown on a tax return you can provide other documentation as well if it is acceptable.

If either you or your sister is married or in a domestic partnership then it could get more complicated.

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Postby dznutz » Fri Feb 24, 2012 8:25 pm

i'm currently a full time med student and currently no income. have a one other credit card for about 3 yrs, for american express everyday blue cash approved me for a 2.3k limit. fico above 720. i put down income of $0. my guess is they either look into income if fico is just below their cutoff.

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Postby PlatinumAMEX94 » Sat Feb 25, 2012 1:29 am

DoingHomework wrote:You should write down the combination of all income you are pledging to be available to pay the credit card.


Why the repeat? That is exactly what I said.

"Unless that person has given you spending authority on their money, you can't claim it to pay your AmEx bill."
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