Applying for credit can be nerve-wracking when it comes to figuring out what constitutes income, and do food stamps qualify or not? Also, do food stamps, officially known as the Supplemental Nutrition Assistance Program (SNAP), count as income in a credit application? Let’s look at this for clarity.
Can you include food stamps as income on a credit application
On a credit application, lenders usually require your gross income per year, which can cover different sources of income. For example, common sources of income that are usually accepted include:
- Earned income (salaries, wages, bonuses, tips, and commissions)
- Self-earned income
- Returns on investments
- Retirement funds (like Social Security, pensions, and annuities)
- Public assistance programs
There are various categories of public assistance, and not all programs fall into the same category. For credit purposes, non-cash benefits, such as food stamps, are generally not considered as income.
Read more: These are the SNAP Payments as of January 1, 2025: when are Food Stamps paid in each state?
What types of income should you report on a credit application
Understanding what to report as sources of income is crucial for you to apply for credit accurately. Besides income from a regular job, you can also report:
- Self-employment income: Freelance work income, contracting, or business operation income.
- Investment income: Interest, dividends, and other investment income.
- Retirement benefits: Social Security, pensions, and retirement account distributions.
- Alimony and child support: They can be reported if they are consistent and traceable.
- Cross-accessible income: If you are over 21, you may also claim as income any funds provided by a partner or spouse to which you have reasonable access.
In any case, you will want to be sure any income claimed is somewhat regular, verifiable, and available for debt repayment.
What happens if you misreport income on a credit application
Accuracy on your credit application is crucial. Misreporting of income, either intentional or unintentional, carries serious consequences:
- Financial audits: The lenders may ask for a financial audit in case they find an inconsistency, and you’ll have to provide documents like tax returns or pay stubs.
- Adjustment of credit limit: Issuers can reduce your credit limit or close your account if discrepancies are found.
- Legal repercussions: Intentional forgery may attract severe penalties, including fines and potential imprisonment.
As CreditCards.com indicates, “At worst, this type of fraud can result in up to $1 million in fines and/or 30 years in prison, says the Federal Trade Commission.”
Read more: Can beers and wines be purchased with SNAP Payment benefits and what is covered by Food Stamps?
How does income affect your chances of getting approved
When it comes to income assessment, lenders truly want to know whether you will be able to pay back the loan. A prospective borrower with a fairly higher and steady income has a much better chance of getting approval and qualifying for better terms, such as higher credit limits or lower interest rates. Conversely, low income or unstable earnings may restrict the options available to you regarding credit.
Income is only one consideration for lenders. They will also consider a debt-to-income (DTI) calculation that compares monthly debt obligations with gross monthly income. Low DTI means better financial standing, which ultimately enhances credibility.
