One common credit card question: Does your salary and income impact your credit score? You may be glad to know it doesn't. The size of your paycheck does not influence whether you have a good or bad credit score.
"Income isn't considered in credit scoring systems," John Ulzheimer, formerly of FICO and Equifax, tells CNBC Select.
"Income isn't even on your credit reports so it cannot be considered in credit scores because credit scores only consider what's on your credit reports," Ulzheimer explains. "In fact, no wealth metrics are factored into your credit scores."
That means your debt-to-income ratio and net worth also don't impact your credit score.
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What impacts your credit score?
Income doesn't affect your credit score, but it's still important to know the five main factors of a FICO credit score, which is the most common credit score used by lenders.
- Payment history (35%): Whether you've paid past credit accounts on time is the most important factor of your credit score.
- Amounts owed (30%): The total amount of credit and loans you're using compared to your total credit limit, also known as your utilization rate.
- Length of credit history (15%): The length of time you've had credit.
- New credit (10%): How often you apply for and open new accounts.
- Credit mix (10%): The variety of credit products you have, including credit cards, installment loans, finance company accounts, mortgage loans and so on.
Do lenders consider your income?
While income doesn't affect your credit score, Ulzheimer adds a disclaimer: "That certainly doesn't mean income and wealth aren't considered by lenders." After all, when you fill out a credit card application, you will be asked to enter your income.
When lenders review your eligibility for credit, he explains, they typically measure two things: Your ability to pay your bills (also known as capacity) and whether you pay your bills (also known as credit risk).
Income is considered a measurement of your capacity, not credit risk. While income doesn't have a direct impact on your credit score, it can have an indirect impact since you need to have sufficient income to pay your bills. And if you don't make enough money to cover your bills, you can rack up debt or miss payments, which can negatively impact your credit score.
The size of your income doesn't necessarily affect your credit limit, and having a high salary doesn't guarantee a higher line of credit. However, if you update your income with a card issuer to a higher amount, you may see an increase in your credit limit, which could be positive for your credit utilization ratio. Also, some cards, like the American Express® Gold Card, have no preset spending limit, which means they don't assign a credit limit. Terms apply.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
How does my income affect my credit score? Your income doesn't directly impact your credit score, though how much money you make affects your ability to pay off your loans and debts, which in turn affects your credit score. "Creditworthiness" is often shown through a credit score.
Does your salary show up on your credit report? ›
Your salary is not on your credit report. It has been more than 20 years since credit reports included salaries. Credit bureaus stopped collecting salary information because the data was self-reported and usually inaccurate.
Does your job affect your credit score? ›
Having a job doesn't increase your credit score, or directly impact your score at all. Neither does losing your job. But your employment and income can affect your ability to access credit since lenders consider this information when deciding whether to extend credit to you.
Is your income considered when calculating your credit score? ›
Many factors are used to calculate your credit scores, including things like payment history, your current debts and even the length of time you've had an account open. But your income, banking history and certain bills aren't part of the mix.
Does a regular paycheck help your credit score? ›
In turn, a regular paycheck helps your credit score because it can help you to more easily make on-time payments. Your income can also impact your credit score because income is something that lenders typically look at when you apply for a line of credit.
Does my salary affect my credit score? ›
How does my income affect my credit score? Your income doesn't directly impact your credit score, though how much money you make affects your ability to pay off your loans and debts, which in turn affects your credit score. "Creditworthiness" is often shown through a credit score.
What is a good income to get approved for a credit card? ›
A good annual income for a credit card is more than $39,000 for a single individual or $63,000 for a household. Anything lower than that is below the median yearly earnings for Americans. However, there's no official minimum income amount required for credit card approval in general.
Does working make your credit score go up? ›
Income doesn't affect your credit score, but it's still important to know the five main factors of a FICO credit score, which is the most common credit score used by lenders.
How do credit bureaus know your income? ›
Income is not part of your credit report. And while lenders often factor your income into their lending decisions, they'll typically get that information directly from you during the credit application process.
What credit score is too low for a job? ›
There is no minimum credit score for a job. Employers do not even have access to your score but some may check your credit history as part of the hiring process, especially if the job involves financial responsibilities or access to sensitive information.
1. Most important: Payment history. Your payment history is one of the most important credit scoring factors and can have the biggest impact on your scores. Having a long history of on-time payments is best for your credit scores, while missing a payment could hurt them.
Is a 900 credit score possible? ›
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
What is a good FICO score? ›
Which factor has the largest direct impact on your credit score? ›
1. Payment History: 35% Your payment history carries the most weight in factors that affect your credit score, because it reveals whether you have a history of repaying funds that are loaned to you.
What payments affect your credit score? ›
Only those monthly payments that are reported to the three national credit bureaus (Equifax, Experian and TransUnion) can do that. Typically, your car, mortgage and credit card payments count toward your credit score, while bills that charge you for a service or utility typically don't.
Is credit score more important than income? ›
Higher earnings can certainly help you attain good credit, but only if you're managing your money and debt payments wisely. Here's why a good credit score is almost always more important than your income.
Is your income listed on your credit report? ›
“Income isn't even on your credit reports so it cannot be considered in credit scores because credit scores only consider what's on your credit reports,” Ulzheimer explains. “In fact, no wealth metrics are factored into your credit scores.”
Can creditors see your income? ›
Income is not part of your credit report. And while lenders often factor your income into their lending decisions, they'll typically get that information directly from you during the credit application process.
Do all jobs show up on credit report? ›
Your employment history may be listed on your credit report if you provided information about where you work to a creditor. Lenders typically ask for employer information on credit applications to help verify your identity but they're not obligated to report your job history to the credit bureaus.
Do banks actually check your income? ›
Key takeaways:
Lenders require income verification because they don't want to approve a loan you can't afford. Modern technology allows lenders to verify income from many employers electronically. If you receive your income in cash, you should be able to prove it with bank statements or tax returns.
