How to get approved for a credit card on a low Income

Despite living in a digital world with information at our fingertips, misinformation about the credit card industry remains prevalent. I’ve covered this space for more than 25 years, and I’m still amazed by how many consumers assume that a low or limited income ruins their chances of getting approved for a major credit card.

The good news is that this assumption is simply false. While card issuers do consider income, it is by no means the deciding factor. In fact, you can get approved for a secured credit card with no income at all.

Your credit score plays a much more critical role than your income during the application process. Specifically, issuers evaluate your credit history, current debt levels, and overall credit risk.

No one wants to go through the application process just to face a denial. This article dispels common myths around securing a card with low or variable income — including freelance or gig work — and helps you identify the right type of card for your specific financial situation. Ultimately, you should feel empowered to find a card that fits your needs, even if your income is limited or fluctuates.

Can you get a credit card with a low income?

The short answer is yes. However, card issuers generally require you to disclose your income during the application process due to the CARD Act of 2009.

The law includes an “ability-to-pay” provision, which requires issuers to verify that you have the financial means to pay back your debt. Despite this rule, most cards do not enforce a strict minimum income requirement. One notable exception is premium reward credit cards, which issuers typically reserve for higher-income consumers due to their robust perks and high annual fees.

This flexibility is crucial for a significant portion of the population. Based on U.S. Census Bureau data, roughly 37.9 million people — approximately 11.5% of Americans — live below the official poverty level, and many are unbanked or underbanked. Fortunately, you do not need a traditional bank account to qualify for a credit card.

Does income affect approval?

Certainly, having no income limits your chances of being approved for a credit card under the CARD Act. Conversely, a high income can improve your approval odds for premium cards.

On the flip side, a multi-millionaire can easily face denial if they have a low credit score or no credit history at all. This reality often surprises consumers and underscores why a six-figure income alone does not guarantee card approval.

On a related note, most card issuers don’t even require that you document or provide proof of your income. According to Gerri Detweiler, credit and small business expert and coauthor of “Finance Your Own Business: Get on the Financing Fast Track,” “unlike a mortgage, you aren’t likely to have to provide documentation (like a paystub or employer verification), but if the income you list is out of whack it could flag your application as potentially fraudulent, or result in a denial.”

In short, income can affect approval but often doesn’t play a critical role in the application process. And your chances of getting approved for a credit card with low income are actually quite good if your credit is good.

What matters more than income?

As noted above, your credit score typically matters more than your income when it comes to getting approved for a card. Megan Daniels, a travel writer and founder of JourneyCurrencies.com, explains that “income is part of the picture, but it’s not the main determining factor. Issuers care more about how you manage credit. Someone with lower income and strong [credit] habits is often a safer bet than someone earning more but carrying [large loan] balances.”

Let’s break down a few of the main components of your score:

• Debt-to-income ratio (DTI): Your DTI compares the amount of debt you pay each month to your overall income. Issuers are often more concerned about your ability to repay than your income level.
• Credit or payment history: The length of your credit history makes up 15% of your FICO® Score, the most widely used credit scoring model. Also, issuers care about your payment history, which is an indication of how well you’ve managed your credit accounts.
• Credit utilization ratio: This ratio measures how much of your available credit you are actively using. As one of the most critical factors in your credit history, credit utilization typically accounts for 30% of your FICO® Score.

BONUS TIP!

Maxing out a credit card can significantly damage your credit score. Utilizing nearly all of your available credit on a single account pushes your credit utilization ratio toward 100%. To maintain a healthy score, aim to keep your utilization on every account below 30%.

What counts as income on a credit card application?

The good news is that there are normally several different types of income sources you can use on an application. Moreover, some cards loosely define income. For example, if you are in college, you can likely qualify for a student credit card with income that doesn’t come from a job, such as allowances or certain grants and scholarships.

Here are some of the most common types of income to consider including:

• Household income: Detweiler opines that “if your spouse or partner who lives with you contributes toward your bills, you can likely include their income in your household income.” The caveat is that you must have reasonable access to these funds. Daniels adds that “a lot of people assume no personal income means no approval, but that’s not how it works. If you have access to household income, that can usually be included. I’ve been approved for cards as a stay-at-home parent using that exact approach.”
• Gig jobs:  Gig workers are independent contractors, including temporary workers, who perform on-demand, project-based tasks. They comprise 36% of U.S. workers as of 2022, according to global management consulting firm McKinsey and Co. One popular example would be an Uber driver.
• Freelance or self-employed income: Approximately 16 million people in the U.S. are self-employed, according to the Center for American Progress. This stat includes freelance-type work such as blogging, graphic design, and consulting. While including self-employed income can be challenging when applying for a mortgage, it’s quite a bit easier when applying for a card since issuers rarely ask you to verify such income.
• Child support: You can include child support as income to help qualify, but you are not required to do so. Child support is considered valid income if you rely on it to pay your bills.

 ➤  SEE MORE:What are the best credit cards for gig workers and freelancers?

Common mistakes to avoid

There are numerous mistakes that lots of consumers with low income make. Here are a few of the most common:

• Underreporting income: Be sure to include all types of income and not just W2 income. Interest income, for example, from a savings or checking account, can be included. Overlooking household income is also a common mistake.
• Listing net pay instead of gross pay: Detweiler explains that “the application will specify which type of income you should use, but often gross income is requested. Gross income is income before taxes and other deductions, and it can be a little – or a lot – more than what lands in your bank account.”
• Pay attention to the wording on the application: If the application says annual income, make sure you list your yearly rather than monthly income.
• Include your average income if you’re self-employed: If you are self-employed, you may need to give an average or estimate of your income if it fluctuates. Listing your income based on the most recent month may do you a disservice, especially if your average monthly income is much higher.

 ➤  LEARN MORE: Can I apply for a credit card with no income?

Can you get a credit card between jobs?

You can certainly qualify for a credit card if you are unemployed or between jobs. And the good news is that your credit score will not be negatively impacted by your unemployment since credit scores do not consider income. Scores are strictly based on credit reporting data, such as your loan repayment history, rather than financial assets or salary.

Here are a few key points to consider when you are between jobs:

• Unemployment benefits can be listed as a valid income source.
• Severance pay may be included on your application.
• What matters most is what income you have access to right now.
• Avoid excessive applications: Applying for multiple credit cards within a short window can negatively impact your credit score. Each application triggers a hard inquiry, which typically causes a temporary dip in your score.

How to improve your chances of getting approved

While approval for a low-income credit card is never guaranteed, you can take practical steps to improve your odds. Consider these strategy tips to strengthen your application:

• Utilize pre-qualification tools: One great benefit that many card issuers offer these days are pre-qualification tools. Daniels is a big fan and notes that Capital One, Citibank and Chase sometimes offer pre-qualification options for their cards. American Express will “let you see if you’ll be approved and/or get a welcome or bonus offer before you confirm and it negatively affects your credit,” she says. These tools help you determine if you’re likely to qualify for a given card without having to actually apply (and have your score dinged due to a hard credit inquiry). This type of pre-approval is often called a soft credit inquiry, which does not negatively affect your score.
• Check your credit score: Obtaining your score before you apply helps you identify which cards are realistically within reach. Numerous free services allow you to check and monitor your credit profile. For a comprehensive breakdown of what to look for, read our guide on what credit score you need to get a credit card.
• Start with a secured card if necessary: A secured card is an excellent credit-building tool designed for consumers with poor or no credit history. It requires a refundable security deposit that serves as your credit line. If your credit score prevents you from qualifying for a traditional card, this option is often your best starting point. By using the card responsibly, you can often improve your score within six to 12 months, making it easier to transition to a standard unsecured credit card.

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The bottom line on low-income approval

While having a low or variable income can complicate your personal finances, it does not preclude you from qualifying for a credit card. Ultimately, your credit score and application strategy — such as utilizing pre-qualification tools — matter far more than your income level.

Furthermore, most credit cards offer valuable consumer protections and financial benefits at no cost, including grace periods and opportunities to build your credit score.

However, there are risks to consider if you do not use your accounts responsibly. Navigating a low income becomes significantly harder if you accumulate high-interest debt. To protect your financial health, treat a credit card as a secure payment tool rather than a secondary source of income.