Should you alert your credit card issuer of changes to your income?

Written by
Erica Lamberg
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When you apply for a credit card, the issuer considers several factors for approval including your credit score, your income and other variables. Once you have the card, updating your income is voluntary. Generally, credit card issuers mandate you provide your income information when you apply, and sometimes they may ask you to update your income. But, it’s important to understand you aren’t required update your income on your accounts.

If you are asked for income updates, should you comply with this request? Or, should you voluntarily contact your issuer if your income has increased? Here’s what to know to make an informed decision.

Why should cardholders alert their credit card issuer with updates to income?

Although you’re not obligated to update your income information, Jason Gaughan, head of consumer credit card products with Bank of America, said income is a key factor credit card issuers consider when determining credit limits and could indirectly impact your credit score. “If your income has recently changed, it’s recommended that you update this information with your credit card issuer,” he explained. “This one step can help you unlock financial advantages, such as lower interest rates and higher credit limits.”

What are some benefits to sharing a change to your income?

If your income is higher than when you opened your credit card account and you report this increase, there could be benefits to this disclosure. These could include:

  • Higher credit limits. Your income can lead to higher credit limits on your credit cards, giving you more purchasing power and perhaps flexibility, Gaughan indicated. “A credit limit increase can be beneficial for your long-term credit score health, as it can help lower your utilization rate, or the size of your balance compared to your credit limit,” he explained. “Keeping your credit utilization low – using less than 30% of your available credit – can help boost your credit score.”
  • Lower interest rates. A boost in income may work in your favor when you apply for larger loans, such as a mortgage or auto loan as banks and other lenders use the debt-to-income ratio to determine how much more you can afford to take on. “A lower ratio can help you secure a lower interest rate, saving you money on interest charges and fees over time,” Gaughan added.
  • Wider credit card offers. Sharing your income updates with credit card issuers could lead to additional product offers from banks which are tied to your current financial status, including mortgages, a home equity line of credit, auto loans or other credit cards, said Gaughan.

How does someone report this information?

Reporting income updates to a credit card issuer is relatively simple.

“Most issuers offer online account management portals, or mobile apps, where cardholders can easily update their personal and financial information, including income details,” said Rod Griffin, Experian’s senior director of consumer education and advocacy.

If you want a more personalized experience, Gaughan shared that you can contact your credit card issuer using the phone number on the back of your card to inform them about your income changes.

Why you must be honest with reporting your income

Though you’re not obligated to report income changes to your credit card issuer, if you do decide to report this information, you must be honest. According to Experian, credit card issuers may ask you to verify your income, which can be supported by documentation like pay stubs or your tax return. Lying on your credit application is fraud, and there could be legal implications, the credit bureau warns.

What happens if you don’t update your income?

One potential outcome of not sharing your income information is your credit card issuer may not consider you for credit limit increases or adjusted interest rates, as they lack current information about your financial standing, Griffin explained.

But keep in mind you aren’t obligated to update your income information with the credit card issuer. “However, if your income has increased significantly and you don’t alert you credit card issuer, you may be missing out on potential perks, such as higher credit limits, access to a wider variety of credit offers and more,” Gaughan stressed. He also said that while your income does not have a direct impact on your credit score, it is important to ensure that your income information is up-to-date and accurate. “This will help ensure that your financial situation is portrayed accurately and fairly,” affirmed Gaughan.

Are there any drawbacks?

When you alert your credit card issuer that you have increased your income, there could be implications to consider, especially with regard to overspending or impulse buying.

“An increase in your credit limit gives you access to additional credit,” said Margaret Poe, head of consumer credit information at TransUnion. “If you’re having trouble managing your spending, this could lead to you taking on more debt.”

So if you receive a credit limit increase or you request one yourself, Poe advises that you’re sure to make payments on time and keep your balances as low as possible so you can maintain your healthy credit.

Another drawback could be solicitations increasing. Based on your cardholder agreement, credit card issuers may share the income information both in-house and to third parties. You may notice more direct mail offers or see an influx in targeted credit card offers.

author
Erica Lamberg
Cardratings Contributor

Erica Lamberg is a regular contributor to Fox News, Fox Business, Real Simple, and U.S. News & World Report. She writes about business, travel, personal finance, travel insurance, and work/life balance. She is based in suburban Philadelphia....Read more

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