Wednesday, July 23, 2008

Anatomy of a Credit Card Application -- Nuts and Bolts Part III (Conclusion)

Yesterday we wrapped up our look at the terms and conditions that often accompany online credit card applications. Today we'll conclude by looking at the credit card application itself. For illustrative purposes, we'll once again be using Bank of America's WorldPoints Platinum Plus Mastercard application.

The credit card application isn't difficult to navigate. However, it is fraught with potential moral dilemmas -- especially as it pertains to income and other financial information. But we'll get to that a bit later. In the meantime, the application starts off with a bunch of softball questions.

Bank of America wants to know if you're a resident and it wants to know what your first, middle, and last name is. That's simple enough and needs no explanation. Next, we're asked for our home address, city, state, and zip code. Note that all of these questions require a response (as indicated by the asterisk symbol). Our first optional response arrives when we get to the "years at current address" field. I usually answer all of the questions on an application, but feel free to ignore that field if you'd like. It's optional, so it's up to you.

The next field asks about our housing situation. A drop down box gives you five options to choose from: other, own/buying, rent, parents/relatives, and dormitory. Choose one of the fields and then provide the amount of money that goes toward that particular housing question. If you have a mortgage, it wouldn't be too difficult for an underwriter to verify your answer (the mortgage would be listed on the credit report and the amount of that mortgage would be listed). Renters, however, have a different situation. Rental information is not listed on credit reports. As such, it would be easy to fudge this part of the application. But do yourself a favor: don't give false information.

As codified in 18 U.S.C. § 1014, it's a crime to knowingly provide false information in an effort to influence the credit card company's decision as it relates to your application. The statute provides a laundry list of financial entities that are covered under the rule. The banks that underwrite credit cards are included. The person who commits this kind of fraud "shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both," according to the statute. In other words, knowingly putting false information on a credit card application could have severe consequences (assuming you were ever caught and someone wanted to prosecute it). My best advice? Just be truthful when filling out applications. Indeed, committing this kind of fraud could be especially troublesome if you eventually file for bankruptcy and try to discharge your credit card debt. Credit card companies, if they could prove you lied on your application, would have all the proof they need to block you from being able to discharge this particular debt.

Moving on, we're next asked to provide information about our phone number and mailing address. Both fields are required. Answer those and continue with the rest of the application.

After dealing with the address and phone number information, we're asked to provide our social security number, date of birth, mother's maiden name, and email address. These are all required fields. The card company asks for the social security number so that it can pull your credit report. Date of birth is used as part of the identification process. Next, Bank of America would like to know if you have any accounts with them. If you do, check those that apply.

Next up is the employment information. A drop down box allows for seven possible answers: employed, homemaker, permanently disabled, retired, self employed, student, and unemployed. Choose the one that is most appropriate. If you choose "employed" you'll be asked to provide the name of the company that you work for and its telephone number. Everything else is optional, including household income. As a practical matter, though, I do provide household income, figuring that it will give the credit card company more data to work with when assigning an initial credit limit. The choice is yours, though.

Regarding household income, it's always been my practice to only include income that I can rely on when paying my credit card bill. If there are five working adults in my household, and I can only count on two of them to help repay my bill, I only use those two in my calculation. Some people, however, are more aggressive than me. They'll include everyone in the house -- regardless of whether they're a source of financial support. How you handle this particular question is up to you.

Finally, we are asked about any balance transfers that we want to do. If you're planning on a balance transfer, then indicate that here. If not, move on to the next field, which deals with a credit protection program that Bank of America is peddling. I always decline this protection. I'd rather not pay protection money to Bank of America. But, as always, you'll have to figure out if you want this sort of insurance policy. It's not for me. Last, you're asked about additional cardholders. If you'd like to make someone an authorized user on your account, feel free to identify the person. That person will be issued a card as well.

We're just about done. Before submitting your application, Bank of America would like you to verify all of the information that you've provided. Click the "verify your information" button. You'll be presented with all of the answers you've provided during the application process. This is where you'll be able to edit any of the answers you previously gave. (I imagine this is also where Bank of America would like you to think about 18 U.S.C. § 1014 again.)

Assuming everything looks good, it's time to submit your application. You'll either receive an instant approval or you'll be informed that your application needs further review. If your application does need further review, you'll receive a link to Bank of America's "application status" page.

And that, my friends, is that. I hope this exercise has been an educational one.

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Cognomen said...

When asked for the monthly mortgage
amount, should you give them the P&I amount or the whole P&I, insurance and taxes when they're escrowed together?

Credit Matters said...

I'd give them the amount of the check that you write each month. I'd exclude insurance and taxes.

In other words, strip out the taxes and insurance if they're being rolled in each month.

That's my preference.

Cognomen said...

Yes, ours is payed all together. I really hadn't given it much thought before, but it would make our DTI look a little better. :)

Credit Matters said...

So, what I am saying is that I would only include P&I. I did not have impounds on my mortgage; I paid property taxes (separately) at the beginning of the year. Ditto property insurance.

I think most credit card companies are expecting you to put P&I only as your payment each month.

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