How Often Do I Have to Update My Income to My Credit Card Company?

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KEY POINTS

  • Credit card issuers require you to state your income when you apply for a card, and they will likely ask you to update your income periodically.
  • It's a good idea to update your income on file with them when it increases, because they could also increase your credit limit based on it.
  • You're not required to update your income on file, but it could improve your credit score if you get a higher credit limit as a result.

If your income has gone up, it's easier to make a case for a credit limit increase.

Credit cards are an extremely useful financial tool, but they come with a lot of potential pitfalls. If you're pretty new to the world of credit cards, you might have questions around how they work, and how your income relates to your financial profile with a credit card company. How important is it to update your income on file, and how often should you bother? Let's break it down.

Oh no, not another pop-up!

If you've signed into a credit card account via the issuer's website recently (and I sure hope you have; it's good to keep on top of your balances and pay your bill on time every month), you may have gotten a little pop-up asking you to update your contact information and income.

We all have a lot of pop-ups in our lives, competing for our attention, but this is a particularly important one. The contact information request is especially important; if you've moved or changed phone numbers, you want to make sure your creditors can still reach you to send statements or alert you to unusual activity on your accounts. But why are they also bothering you to update your income?

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How does income relate to your credit limit?

You likely would have had to provide your income when you applied for the card initially. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 set some very important regulations in place regarding interest rates, billing, and other credit card concerns. As part of this law, credit card issuers must consider an applicant's ability to make required payments before approving a new account opening, offering an initial credit limit, or increasing an existing limit. This means collecting your income information.

As an aside, you won't be asked to provide proof of your income, like pay stubs or W2s. Your credit card company will use statistical data to verify your claim. So while you could tell them you make $100,000 a year as a full-time college student, they will probably doubt your claim, and based on the statistics, they'd be well within their rights to do so.

It's important to keep your income updated, because keeping your card issuer abreast of positive changes with your income means you can ask them for credit limit increases.

Credit limit increases are often something to strive for

Let's say your current credit card limit is $5,000, and you're perfectly happy with that. You're good at managing your available credit, and you keep your balance at or below $500, which is just 10% of your credit limit. This translates to a low credit utilization ratio. It's generally recommended that you keep this number below 30%, and it's the second-most important factor making up your FICO® Score. A low credit utilization ratio shows creditors you're responsible with the money you borrow.

But if you get a raise at work, update your income with your credit card company, and then ask for and receive a credit limit increase, you'll be lowering your credit utilization ratio even further. If your credit limit is raised to $10,000, and you're still only using $500 of that credit available to you, you'll only be using 5% of your credit. And if you should need or want to charge more on that card (bearing in mind that it's a credit card best practice to pay off your balance every month to avoid interest charges), you now have a higher limit to do so.

However, you don't have to update your income

You can certainly ignore that little pop-up asking you to update your income (but if your contact information or address has changed, I urge you to update that). Maybe your income hasn't changed, or maybe it's even gone down because you changed jobs, or you cut back to half-time so you can go back to school. Or maybe you did get a raise, but you don't want your creditor to raise your limit. The temptation of a higher credit limit can be too much for some people, and if you've had difficulties managing credit in the past and want to avoid that temptation, you can.

Providing updated income information to a credit company might also spur it to contact you about other products they offer, like auto loans. And it might even share your information with other companies, depending on your cardholder agreement, so you'd get even more offers. Just like pop-ups, we also all have enough marketing emails and snail mail credit card offers in our lives, so you may be able to avoid some by forgoing the income update.

So, how often do you have to update your income with your credit card company? If you're hoping to improve your credit score and increase your credit limit, it's a good idea to update that income information as it changes. If you get a raise next week, go update your information. But if you'd rather not have more temptation to spend money on your credit card, or you'd rather not receive more financial offers, then you're free not to update it at all.

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