An increase in income can help your finances in several ways. Obviously, if you earn more money, you can invest or save more. It’s also easier to live on a budget when you have a higher income.
There is something other than an increased income can do for you, however, that you don’t necessarily think of. It could help you improve your credit score.
Now, there’s no guarantee that your card issuer will give you a bigger line of credit just because you say your income has increased. But there is a chance of it happening. And since it only takes a second to update your earnings with your card issuer and there’s absolutely no downside to logging into your account online and doing it, it doesn’t no harm in keeping your credit card company informed when you get a raise.
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Notify your credit card issuers if your earnings have increased
If your income has increased, you will want to let your credit card transmitter. You can usually do it by logging into your online account and visiting the website section where you update your profile or where you update your personal information.
There should be a question in these areas of the website about how much you earn. Use it to report your new higher earnings.
Why does a higher credit limit improve your credit score?
It’s simple. When your creditors know that your income has increased, this could encourage them to increase the limit of your credit margin. This limit, which establishes the maximum amount you are eligible for borrowing, is based on many factors, including your credit history as well as your income. When you earn more, your card issuer may decide that you have the right to borrow more.
A higher credit limit can have a positive impact on your credit scoring, as it affects your use rate. Your credit use rate is the second largest factor used to establish your credit scoring, only your payment history with a greater impact. It is calculated by dividing the credit you used on your card by the total amount of the credit which has been granted to you.
When your credit limit is increased because your income has increased, this will immediately translate into an improvement in your credit utilization rate. Say, for example, you had a balance of $100 on a credit card with a limit of $500. You would have a credit utilization rate of 20% ($100/$500). But if your credit limit was increased to $1,000, you would have a 10% utilization rate instead. Since a lower use rate is preferable, this could lead to an immediate increase in your credit scoring.
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