Income "supporting" credit card limits?

[Anonymous]

Assuming a person can manage credit well enough to the point of not destroying their score, 5x income isn't too outrageous. $30k income (let's assume net) is $150k @ 5x. Assume they keep their total utilization @ 10% ($15k). Mininum paying @ 18% interest is $375/month or a DTI of around 16.5%. Doubled up, so it doesn't take 30 years to pay off the debt, and we're @ $750, or 33% DTI.

And that kind of utilization could occur, theoretically. Let's say they fall on hard times, unemployed for 6 months or so, leaning on cards to cover expenses. Not a great situation, but they could in theory manage to make it through the job lull and still maintain a good score. Which wouldn't be possible if they had to put that $15k on credit lines with significantly lower limits.

[disdreamin]

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@Anonymous wrote:

@Assuming a person can manage credit well enough to the point of not destroying their score, 5x income isn't too outrageous. $30k income (let's assume net) is $150k @ 5x. Assume they keep their total utilization @ 10% ($15k). Mininum paying @ 18% interest is $375/month or a DTI of around 16.5%. Doubled up, so it doesn't take 30 years to pay off the debt, and we're @ $750, or 33% DTI.

And that kind of utilization could occur, theoretically. Let's say they fall on hard times, unemployed for 6 months or so, leaning on cards to cover expenses. Not a great situation, but they could in theory manage to make it through the job lull and still maintain a good score. Which wouldn't be possible if they had to put that $15k on credit lines with significantly lower limits.

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5x income looks fairly outrageous when you start getting into six figure and up income. Can you imagine someone who makes $100k having a half million in credit? Even if each line was a healthy $25k, you'd still be talking 20 active lines, each with $25k on them. I agree wholeheartedly with those who have said this isn't a one-size-fits-all situation.

I actually wonder if this is one place where AAoA really makes a significant difference? Like, longer AAoA with good scores>shorter AAoA with same scores for some companies. No idea, just pondering...

[RonM21]

It probably also is considered by your overall file and what other debt obligations you have. But as mentioned already, there can also be no true reasoning either.

[Creditplz]

2015 ending income was 186k and my highest CL is 25k, 104,750 total CL. They choose profile over income..

[Anonymous]

9 times out of 10 I think it's the credit profile that limits potential CLIs and not income "not supporting" it.  That's the feeling I get from reading on here. 

[Kevin86475391]

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@longtimelurker wrote:

It really depends on what "support" means (which was OPs question).   For example, if these people had no household income, I doubt if they would get approved.  So in the ccs varying model, for certain profiles, "support" might mean up to 5x income for example, and other profiles might get 0.5x.    We just don't know.

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I very much agree with this point.

Having the 'income to support a credit limit' is just one piece of the bigger picture. Credit history, utilization, and of course credit score are all going to factor in too, as of course they certainly should. Two people with the same income do not equate to the same risk and as longtimelurker said one of those people may be able to 'support' a much higher credit limit than the other. That isn't income not mattering; it's simply other factors also mattering.

The reality is that people get approved or denied for a whole host of reasons. Just as with most other aspects of a credit profile there simply isn't a black and white line regarding income and credit limit. We know the general answer: higher income is better. Similarly we know that longer credit history is better, lower utilization is better, fewer new accounts is better, etc.

The creditor and particular card are obviously major factors too. This point is of course personally illustrated to most card holders. Most of us don't have the exact same limits on all our cards, and while that's likely due to a variety of reasons, it also clearly shows that different lenders have different opinions about what someone qualifies for, based on income and all the other factors.

[Anonymous]

I was told by Nixon (not on here lately) that it should be twice your total incomes.  I kind of went a bit higher than that but am in the process of scaling back.  And as I get higher limits, will cut cards down.  Just want a good total limit with the least amount of cards.   I have seen many on here with a 20k income get a 15K cl, including my daughter!  Can't imagine how any of use with higher incomes could ever do that.  

[Dahlia77]

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@Anonymous wrote:

What exactly does this mean?  Is there a definition that can be quantified?  I get the overall idea of the statement "Your income needs to be able to support your credit limits" but I'm not at all clear as to how this is determined.

A lot of times on here I'll be reading a thread where someone gets a new card with a low (relatively) SL, or they'll be trying to obtain a CLI on a card without success and someone will chime in with "your income needs to be able to support the limit you want" or something similar.

Take someone with $40k income.  What credit limits does that income "support"?  is it able to be quantified?

There are people on this forum with $40k income that have $10k in credit lines, $40k, $80k, even people with 3X their income / $120k in combined credit limits.  $120k in credit lines can be supported by $40k?  I guess this is what I'm unclear about.

I suppose the expectation isn't that a consumer would max out all of their credit lines at once, but theoretically they COULD.  That said, there's no way that many people have incomes that could support those limits.  So, clearly I'm taking the term "support" too literally here and am just looking for some sort of clarification.  

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I have no idea what their internal policies are or what information they use from reports like Innovis and what not to determine credit lines or worthiness but I do know this:  I have only 1 year 2 months average credit age and my scores were crappy until 3 months ago.  However I was granted credit with 2 of the major banks with really decent starter limits  My income is in the mid to high 6 figures and I can't help but think that this was a contributing factor to be accepted when scores were low and then getting in with more conservative lenders with good starting limits.  I didn't have much credit and payment history to go on and little other credit history (I pay for my cars in cash so no loans).  I see people on here who have had better scores than me and a hell of a lot thicker files and much more history to back them up and I have none of this.  So yes, I do believe that having a high salary with low overhead must've have something to do (in my case) with lenders chasing me all the time to give me credit.  Whether that can be used as a data point or whether everyone is judged differently using some unknown algorithm I do not know.

[Gmood1]

I'm going to say profile. My AAoA isn't that great 1.7 yrs. Individual income is just below 70k. I do have a mortgage and two auto loans. I normally finance my auto loans at or near half their original value. My mortgage is my largest payment. All of my accounts are individual no cosigner. My available credit is nearing 5 times my income.

[disdreamin]

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@Dahlia77 wrote:

I have no idea what their internal policies are or what information they use from reports like Innovis and what not to determine credit lines or worthiness but I do know this:  I have only 1 year 2 months average credit age and my scores were crappy until 3 months ago.  However I was granted credit with 2 of the major banks with really decent starter limits  My income is in the mid to high 6 figures and I can't help but think that this was a contributing factor to be accepted when scores were low and then getting in with more conservative lenders with good starting limits.  I didn't have much credit and payment history to go on and little other credit history (I pay for my cars in cash so no loans).  I see people on here who have had better scores than me and a hell of a lot thicker files and much more history to back them up and I have none of this.  So yes, I do believe that having a high salary with low overhead must've have something to do (in my case) with lenders chasing me all the time to give me credit.  Whether that can be used as a data point or whether everyone is judged differently using some unknown algorithm I do not know.

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Wow, first off I need to consider looking for a better job. I cannot comprehend a mid- to high-six figure salary! I can't even begin to imagine what I'd do with $500,000 or more a year. Congrats Dahlia77, and just a little bit of green-eyed-monster going on over here (UNDERSTATEMENT!).

As to the question of income, mine is nowhere near that level (tis but a small fraction of it, unfortunately) but I get offers all the time for credit, bonuses for opening accounts, etc, obviously more to do with my credit profile than my income. A high enough salary (or investments at a particular financial institution) probably do prompt you to start getting chased with offers targeted simply because deep pockets are probably a lot more attractive to lenders than shallow ones.