Baby-sitting money counts as income on card application


Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for

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Question Dear Opening Credits,
If applying for a student credit card, should you mention money earned in cash for a baby-sitting job under gross monthly income?  -- Lexi


Dear Lexi,
As long as you can count on this job to continue in the foreseeable future, the answer is yes -- go ahead and include what you're making from the baby-sitting gig on the credit card application.

What you make on a monthly basis is an important qualifying factor for any type of loan. The issuer will need to know if you can afford the payments for that product now and in the future. That means cash flow -- aka income.

For a credit card, the issuer will need to determine whether you can make at least the minimum payments based on a specific credit line. For example, you won't need to bring in much money for a $500 credit limit, because even if you charged the card to the max, the payments would be quite affordable. However, if the issuer granted you a $5,000 credit line, the minimum payments based on such a sum could be around $150. The amount you earn will have to be enough to meet that payment plus estimated household expenses and any other debts you may hold.

In short, sufficient income will act as assurance that you can and will keep the account in positive standing. A good credit score will be built if you pay on time every time, so take proper care of that card if approved.

I bet you're wondering if the credit issuer will check to see if you really are earning what you say you are, though. Will the family you're baby-sitting for get a call from the bank? That would be highly unlikely. Unless you're applying for a particularly large loan, as you would with a car or mortgage, this aspect of the application process is typically based on trust.

That said, you are obligated to state the truth. If you earn $1,000 a month in baby-sitting and believe this job won't be going away anytime soon, list it -- but not more. Be conservative. While it may be tempting to overestimate your earnings so you can be eligible for a credit card or score a higher charging limit, don't. First, you'd be lying, and it's illegal to provide false information on a credit application. If you fluffed the numbers and then ran up a big bill that you do not pay, the issuer might find out and possibly even press fraud charges against you.

Second, you want to be sure  you can manage the debt you may incur. It's for your own protection. A huge credit line can mimic income when you're in a financial pinch. Give in to temptation and you'll run up the card. Then the payments for that balance will be out of line with what you're earning and you'll be stuck because your income can't truly support it!

If you do qualify for a small credit line, use it advantageously. Keep the balance far lower than the limit. Zero it out before the issuer sends account information to the credit reporting agencies (call and find out when that is). This way you'll also be sure to pay on time. These two actions alone will cause your credit rating to rise, which might prompt your credit card issue to offer you a larger credit line in a year or so. Then it will be up to you to decide whether you want it to not!

See related: Credit card issuers vary wildly on how they verify income

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Published: December 23, 2015

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Updated: 10-24-2016

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