Credit cards are an important tool when building a credit history. Having good credit will save you money in the long run because you will get a lower interest rate on big-ticket items such as cars and houses. Keeping your income updated with your credit issuer is important for a few reasons, and here are a few.
1. They have to ask
The Credit Card Act of 2009 requires all card issuers to periodically verify the card holder's income. This is done because it helps them verify your ability to pay. However, this can lead to higher limits on your card which, in turn, can boost your credit. You should always put in this field exactly what you make and not exaggerate the amount. Doing so could constitute fraud and it could also hinder efforts to erase the debt if you should try to work out a settlement in the event you cannot pay the debt.
2. Accessing a higher line of credit without an inquiry
Updating your income could lead to a higher credit line and doesn't result in a hard inquiry on your credit which can lower your score. While having a few hard inquiries per year can only amount to a few points, if you are planning a large purchase in the near future it could be the difference of a great interest rate or a mediocre interest rate depending on the company you are doing business with.
3. Tailored product offers
Updating your income can help the card issuer offer products that are tailored just for you. For example, you may get offers for car loans. Maybe you aren't in the market for a new car, but perhaps the loan you got last year on your new car has a high-interest rate. You might be able to refinance the loan with a lower interest rate and lower payment through an offer extended to you simply through updating your income.
4. Income information is sometimes shared
This can be off-putting to some cardholders, but this can be a pro and not a con. Consider that you have a card with an interest rate of 14%. They share your income information with a third party who is offering you a card with an interest rate of 12%. You might consider a balance transfer and save yourself some money on interest.
5. It could boost your score
When you access a higher line of credit, your available to utilized credit ratio goes up which can increase your score with no extra effort on your part other than sharing your income with the credit issuer. Anytime you can get an easy and simple boost to your credit score is a plus.
Credit cards are an important tool in building and maintaining your credit history. Sharing your income with your credit card issuer is a great way to help the issuer make decisions about credit increases and offering additional products. Understanding credit cards and how to use them are an essential tool in building personal wealth and saving money.