How Does My Income Affect My Credit Limit? (Experian)

Through April 20, 2021, Experian, TransUnion and Equifax will offer all U.S. consumers free weekly credit reports through[1] to help you protect your financial health during the sudden and unprecedented hardship caused by COVID-19.

Lenders weigh a variety of factors when determining what credit limit to offer a new borrower. Your credit score can play an important role, but it’s far from the only thing that matters. When you open an account, creditors want reassurance that you’ll be able to make good on your payments, which is where your earnings come in. Having a steady stream of reliable income can help show lenders that you’re an appealing borrower.

Even after you’re approved, creditors may continue to inquire about your earnings to make sure your borrowing power is still appropriate. Your credit limit can rise and fall based on many factors, including broad economic conditions—and your income is a big part of what shapes it. Read on for a closer look at how your income can affect your credit limit.

Do Lenders Look at Income to Determine Credit?

Most lenders do look at an applicant’s income when determining their credit limit[2]. Creditors want to feel confident that you have the ability to repay your debt obligations without any issues, and knowing your income helps with that.

Your income is not among the information that’s included on your credit report[3], and the way you provide it to a lender can vary depending on the type of credit. If you’re applying for a credit card, for example, the income amount you put on your signed application is usually what the creditor will use to help determine your credit limit.

Lenders sometimes go a step further and require that you verify your stated income. This is common with auto loans and mortgages. You may be asked for recent pay stubs or tax returns to confirm your employment and earnings. These details help lenders determine your debt-to-income ratio (DTI)[4], which measures how your debt obligations relate to your earnings. A borrower with a high income is less impressive to a lender if they are deep in debt.

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