Does income affect credit scores and credit limits?
Your income doesn’t affect your credit scores, and it’s not listed in your credit reports. But it could still impact your ability to qualify for new credit accounts and the loan amounts or credit limits you’re offered.
Learn why your income can be an important part of your creditworthiness even if it’s not part of your credit scores. Also learn how your income and debt can affect your credit limits on credit cards.
What you’ll learn:
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Your income isn’t part of your credit report and doesn’t affect your credit scores.
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Creditors sometimes consider income and your debt-to-income (DTI) ratio when reviewing credit applications and managing existing credit cards.
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Having a high income and low DTI ratio could help you qualify for credit accounts with more favorable terms.
How does your income affect your credit score?
Most credit scores only consider information that’s in one of your credit reports from Equifax®, Experian® or TransUnion®. Your income isn’t part of your credit reports, so it can’t affect your credit scores.
But lenders know your income can affect your ability to manage and pay bills. Your credit history, credit scores, income, outstanding debt and history with a creditor could all impact your overall creditworthiness, which is really what creditors consider when reviewing your application.
Does income affect your credit limit?
Your income can affect your eligibility for a new credit card and the credit limit you receive, so your credit card issuer may ask you to periodically update your income. It could also lower or raise your credit limit based, in part, on changes in your income.
Creditors also compare your income to your expenses when considering your application and setting your initial credit limit. For example, when you apply for a credit card, the issuer may ask for your estimated gross annual income and monthly housing payments. It can also review your credit report from one or more credit bureaus.
The card issuer can use the information in your report to calculate your monthly debt payments. It can add your reported housing costs and income from your application to estimate your monthly debt-to-income (DTI) ratio.
A lower DTI ratio could signal you have more money left over for new bills, such as loan or credit card payments. If you may have income from various sources, such as a job and investments, listing all your eligible income may help you qualify for a card with a higher credit limit.
What should your credit limit be, based on income?
A higher income generally leads to a higher credit limit, but there isn’t a specific credit limit you’ll receive based on your income.
A credit card’s credit limit can depend on many factors, including:
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Your income, employment status and DTI ratio
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Your credit history and credit score
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Your credit limits with the specific card issuer
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Your overall credit limits on all your credit cards
For example, someone might have a Capital One credit card with a $5,000 credit limit and get approved for a new card with a $4,000 limit. If they didn’t have the first card open already, their new card might have gotten approved with a higher limit. Eligible Capital One cardholders may be able to request a line transfer to move available credit from one card to the other.
What’s a good annual income for a credit card?
There’s no specific income for a credit card. But credit card issuers must follow the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 and ensure applicants have enough assets or income to afford a new card’s minimum payment.
You don’t necessarily need to have a job, but you may need regular income to get approved. If the card has a minimum credit limit, your income and DTI ratio will need to be high enough to meet that eligibility requirement.
Some credit card issuers may also have general income requirements. For example, some Capital One credit card’s terms and conditions require average monthly income to exceed monthly rent or mortgage payments by at least $425.
How income affects credit scores and credit limits FAQ
Your income doesn’t affect your credit scores, but it can still be important when you’re applying for and using credit cards.
Does your credit score matter if you have a high income?
Your credit score can be important even if you have a high income. For example, some creditors have a minimum credit score requirement. If you have a lower credit score, your loan or credit card application could be automatically denied regardless of your income.
What if you have good credit but no income?
You could have good credit even if you don’t have an income. However, your income can still affect your creditworthiness. Creditors want to be certain you can repay a loan or credit card.
How do creditors know your income?
Credit bureaus don’t know your income or include it on your credit reports. Most creditors ask for your income when you apply for a new credit card or loan. They might use a tool to estimate your income to see whether it matches what you submit. Or issuers might ask you to verify your income by submitting copies of pay stubs or tax returns.
How income affects credit scores and credit limits in a nutshell
Although your income doesn’t affect your credit scores, it can be an important part of your creditworthiness, which affects your eligibility for new credit cards and the credit limit you’re offered.
If you’re looking for a new card, you can compare Capital One’s credit cards to see the potential benefits and bonuses. You can also check whether you’re pre-approved for a credit card by submitting your information, including your income, without affecting your credit scores.
