Buzz
What could you achieve with an exceptionally high credit limit? What would be off-limits? If you've received requests from your credit card issuer to update your income information, wondering if this might qualify you for a higher credit limit, rest assured, it’s not a scam.
When you apply for a new credit card, you’re required to provide your annual income. Credit card companies must do this by law to ensure you have the means to pay your bills before granting you a credit line.
However, the request for income verification can resurface long after you’ve already started using your card. You may receive an invitation to update your income either through your online account or via email, often with the message, “You may be eligible for a credit limit increase!”
If your income has grown since you opened your credit card, and you have strong control over your spending habits, you should consider updating your income. A higher credit limit could actually help improve your credit score.
This is because approximately 30% of your credit score is determined by your credit utilization: how much of your available credit you’re using. Since issuers report your data to the credit bureaus on a monthly basis, it doesn’t matter if you pay off all your bills before interest starts accruing. Utilization refers to the balance you carry forward, the amount you don’t pay off right away. The lower your utilization (aim for under 10%), the higher your credit score will be.
Of course, the credit card company stands to gain too. If they raise your credit limit, they increase the likelihood that you’ll use more of it, which means they can earn more interest on your outstanding balance. It’s less costly for a card issuer to retain you as a satisfied, spending customer than to go after new clients. However, to offer you a higher credit limit, they’ll need to confirm that you can repay the balance, which is why they ask you to update your income.
To get a credit limit increase, you need more income, but also a solid payment history. If you’re consistently close to your credit limit, you probably won’t see these offers. You need to have good credit already in order to qualify for an even higher score.
