Get Ready To Disclose A Lot More Information When Applying For Credit

The downside to responsible lending is that the lenders will need more information about you, says the WSJ.

Credit card companies are now required to consider an applicant’s income or assets and current debts before approving credit. To do this, they’re going to need to estimate your income. Mortgage lenders who previously relied on pay stubs or, in some cases, winks and elbow nudges, are now asking potential borrowers to provide tax returns.

From the WSJ:

Card companies already are asking for more detailed information in their online applications. Capital One is asking applicants to disclose how much they pay in mortgage or rent payments, how much they have in bank accounts and how much is in their investment accounts. Bank of America and Chase are requiring household income estimates.

In the past, the companies relied on self-reported income information. But lenders already are starting to use Experian PLC’s Income Insight product to verify what individuals report, says Brannan Johnston, vice president, income and deposits for the Costa Mesa, Calif., credit bureau.

Experian came up with its estimates by matching credit reports against a deep database of wages and interest and investment income and determining what information about the number of accounts, total credit, payments and other factors best predicted income.

Mr. Johnston says the income estimates also may be used to decide whether to increase a credit limit, since information on credit-card accounts may not be available or up-to-date. In addition, collection agencies have been interested in using the data to determine the most profitable accounts to pursue.

You may also be asked to fill out a Form 4506-T, which allows the IRS to release your tax information to lenders. Income estimates are based on information from your credit report, so be sure that information is accurate.

Look Who’s Peeking at Your Paycheck [WSJ]