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If you have a job with a fixed annual salary, reporting your income on credit card applications is easy. But for millions of students, stay-at-home parents, hourly-wage workers and freelancers, reporting annual income聽is much trickier.

You want to tell the truth, but the applications rarely make it clear how you should calculate such a number. What鈥檚 an honest consumer to do?

What counts as income

Before the Credit CARD Act of 2009, it seemed as though everyone with a pulse could get a big credit line. Today, that鈥檚 no longer the case.聽The CARD Act requires lenders to聽extend credit聽only when they believe the borrower聽has the ability to repay it. The income you report on your credit card application is one way creditors decide how much credit they should extend to you, if any.

According to an聽amendment to the CARD Act, borrowers over 21 can list any income to which they have 鈥渞easonable expectation of access.鈥� This broad definition includes:

• Personal income
• Income from a spouse or partner
• Allowances and gifts
• Trust fund distributions
• Scholarships and grants
• Retirement fund distributions
• Social Security聽income

Borrowers between ages 18 and 21 can report only independent income, which typically includes:

• Personal income, including regular allowances
• Scholarships and grants

Right now, there are no specific legal guidelines about how irregular income should be calculated. But generally, you should report only income that can be verified by tax returns, a letter or some other document.

鈥淯se common sense,鈥� says Ira Rheingold, executive director of the National Association of Consumer Advocates. 鈥淚f you can鈥檛 prove the income exists, you shouldn鈥檛 list it.鈥�

Remember, when your issuer assigns you a credit limit based on your income, it鈥檚 not a trust fall. If you default, your creditor won鈥檛 be there to catch you; it鈥檒l聽be asking for its聽money back.

MORE:聽NerdWallet鈥檚 Best Credit Cards for College Students

What doesn鈥檛 count as income

It鈥檚 not a good idea to state borrowed money, including student loans, as income. Although there鈥檚 no specific law against it, such reporting would go against the spirit and intent of the 鈥渁bility to pay鈥� clause in the CARD Act, Rheingold says, and could hurt your finances.

鈥淚t鈥檚 debt, it鈥檚 not income,鈥� he says of borrowed money. 鈥淚n my mind, it鈥檚 a really bad idea, bordering on the absurd.鈥�

When the loans come due, paying back the balances on your cards could prove difficult.

When issuers check your income

Most card issuers use a consumer鈥檚 stated income on applications when issuing a card. But in some cases,聽your creditor聽may ask聽to聽you to verify your income or use an income modeling algorithm to estimate your earnings, explains Natalie Daukas, a senior product manager at Experian.

Income modeling

Income modeling algorithms, produced by credit bureaus, estimate your income based on your credit report information. Creditors typically use these聽to double-check stated incomes or determine credit line increases on existing accounts, Daukas says. For credit card companies, these estimations are an easy way to quickly assess a borrower鈥檚 financial standing, without requesting access to tax documents and other verification.

Financial reviews

If you鈥檙e spending a lot or applying for several cards within a short time, some聽creditors will run what鈥檚 called a financial review to verify聽your income. Such reviews are expensive for creditors to conduct, though, and tend to be rare.

During such a review, you may be asked to provide tax returns and other documents to verify your income. If you can鈥檛 provide proof of your reported income, the creditor may lower your credit limits or close your accounts.

What happens if your estimated income is off

Estimating聽your聽annual income in good faith聽and coming up short is聽completely understandable. Inventing self-employment income, grossly inflating your actual income or listing a nonexistent employer, though, is a different matter entirely.

If a聽creditor can聽prove in court that you committed聽fraud when applying for a certain card, it could make that聽debt unable to be discharged in a bankruptcy proceeding, says Scott Maurer, an associate clinical professor of consumer law at Santa Clara University.聽On very rare occasions,聽people have also been convicted聽of fraud for lying about their income on credit card applications, resulting in steep fines and jail time.

But if聽you鈥檝e reported your income to the best of your knowledge, don鈥檛 worry about聽this.

鈥淧roving fraud is not easy, and a consumer who truthfully lists monthly income that happens to be irregular is not going to come close to losing such a suit,鈥� Maurer says.

The bottom line

Listing all the income you have access to can聽help you secure聽a higher credit line and therefore聽more spending power. But it doesn鈥檛 mean you鈥檙e immune from overspending. Borrow sparingly, try to avoid carrying a balance and readjust your budget聽if you face an unexpected income change, such as a job loss or a pay cut.

Your creditor will do only so much to prevent you from defaulting, based on your stated income. The rest is up to you.

This article first appeared at NerdWallet.