Income "supporting" credit card limits?

[Anonymous]

I feel like "income doesn't support the limit" is a BS bogus term that should really say "profile doesn't support the limit."

You can have two people that each have $20k in annual income and both have $70k in total credit lines.  Both apply for another line of credit... one gets it, one doesn't and the one that doesn't reads the reason as being income doesn't support it when IMO it should state that something in the profile is preventing it and the majority of the time it's not going to be income.

Someone with $20k in annual income after taxes and regular expenses is likely going to have next to nothing left in most cases, right?  So next to nothing "supports" $70k in combined credit lines?  That person could put $1000 on 4 or 5 different cards and struggle to even make all 4-5 minimum payments.

[Anonymous]

Limits on most recent cards were the same whether I disclosed personal or household income. History seems of higher weight here.

[Anonymous]

I'm beginning to think almost anything is weighted higher than income.  Again, within reason.  If someone puts down $5k income certainly that's going to hold them back a lot regardless of how pretty their profile is.

I think once you get to an average US salary, whatever that may be, in the majority of cases it's going to be everything other than salary that impacts the creditors decisions.

[Anonymous]

The way I look at it, the card issuers have set limits in place for a variety of factors.

As an example, Bank A has a Super Card with top tier benefits. Internally, they set the range of credit limits for card customers between $500 and $50,000 and the interest rate range between 12-25%. 

Now Person B applies for a Super Card.  Bank A then looks at Person B's credit profile to see if they qualify. In order to qualify, person B must have a credit score of 650 or higher, no more than 10 new accounts in the last 2 years, overall revolving utilization of less than 50%, an income of $12,000 a year or more, and a monthly debt to income ratio of 40% or less.  Now if Person B meets those criteria, they are accepted. Bank A then uses their own specific algorithm to determine Person B's credit limit. The credit score is rated in number of points over 650 out of a maximum of 200, and that percentage is multiplied by the bank's weight on the percentage, which we'll say is 20%. Add in 5% to the total if less than 6 new accounts were opened in the last 2 years or 10% if less than 3 new accounts in that period. A sliding scale is established to fill the 20% of the consideration assigned to utilization, 25% related to income, and 25% to do with debt to income ratio. When all those figures are added up and multiplied by their appropriate percentages of the total, the resulting percentage figure indicates the percentage of the maximum credit limit that will be awarded. 

Now consider that's one fictional bank and one fictional card they're issuing. In reality, banks use actuarial tables and probability models to detetmine exactly what factors they look at and how much weight to give each factor. The exact formulas are most certainly considered trade secrets, and each bank probably uses a slightly different formula for each card, depending on the card's benefirs and the market it's intended for. So while income is definitely "a factor" in detetmining credit limits, there's just no way of knowing how much of a factor or if it's based on a sliding scale or cutoff amounts. I agree that such an answer can be really annoying as there's no way for a customer to be able to predict credit limits, but aside from the actuaries, statisticians, and underwriters who work for the banks, the best answer the rest of us can give is "we don't know.'

[Anonymous]

Solid post above.

[takeshi74]

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@SOGGIE wrote:

Takeshi I've read your many responses where OP's had not disclosed their income information and yet you addressed your notorious "one's income must support..."

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Sorry, I didn't consider that. It's a given, regardless of one's income, that income must support the limit or CLI. In the cases you're citing, I'm not claiming that I know that the poster's income is sufficient or insufficient as obviously I have no idea what it was. I'm just pointing out that income matters. I have no idea whether or not a given person understands these things unless the post I'm replying to contains sufficient information and many seem to assume that one or more of these things are going to lead to a CLI:

• Amount of usage on a card
• Amount of time since being approved or last CLI
• Revolving utilization on a card

However, relying on just one of these or even a combination of these will not determine limit or CLI eligibility.  These factors don't exist in a vacuum and one's entire credit profile and income are always considered.  You could have a lot of usage.  You could have a lot of time pass.  You could have very low revolving utilziation on a given card.  However, if you have derogs, if you have Payment History issues, if you have high revolving utilization on other cards, if you have too many new accounts for your credit profile and/or a lot of credit seeking activity on your profile then these are all things that could prevent you from getting the limit or CLI that you want.  Sorry I don't provide this level of detail with every single post.

Again, I don't have access to specific underwriting criteria for any credit product. Even if I did know a person's income I couldn't verify what sort of impact it would have on limit and could only make a guess at best.

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@SOGGIE wrote:

Quite frankly, the repeated statements that an approval for a CC, SL or CLI "is supported by one's income and credit profile" is (overall) useless.

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Those statements are in reference to those who assume that usage, relationship or even the state of a single account are primary considerations. We have some knowledge about how specific factors play into FICO scoring and can use that information but FICO scoring isn't the only consideration for a creditor. I am being lazy in not going into the details of how FICO generally assesses specific factors but there's always this page that can be used as a starting point as well as other discussions on the topic. http://www.myfico.com/crediteducation/whatsinyourscore.aspx The Understanding FICO Scoring subforum is also a useful resource for those looking for a better understanding.

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@SOGGIE wrote:

My opinion is supported by the fact that many CCC's issue limits far in excess of one's income. If a person earns $36K annually, and they are issued an SL of $15K on a revolver, and additionally issued CLI's of $2K+ every 3-6 months, their income will not support the CL for this account as the CL will far exceed their income. And if this person has multiple accounts as such, the point is proven that income does not necessarily have to support credit approval. I personally know folks whose CL's are 3-4 times what they earn annually.  

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 Limits exceeding income does not mean that income is not a consideration.  I have never claimed that one cannot have limits exceeding income.  My own limits are about 3x and I've stated that I'm above 1x in prior posts.  Income can constrict limits but at what specific points I can't say as I haven't done an analysis or run across one.  It's a tricky thing to determine based on anecdotal evidence even if you aggregate sufficently.

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@SOGGIE wrote:

It is a given that the CCC's have established a questionable system for rejecting approvals by issuing declination letters with ridiculous and unheard of reasons for their denials.  

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The reasons cited aren't always quite so straightforward and sometimes take some digging to understand.  People seem to forget that they're also with respect to one's profile.  "Too many inquiries" is one example.  It's not so much about the number itself.  X might be too many for one and not an issue for another with a thicker/stronger profile.  You can't rely solely on the text of the cited reason and need to consider the entire context.

[Imperfectfuture]

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@Anonymous wrote:

I feel like "income doesn't support the limit" is a BS bogus term that should really say "profile doesn't support the limit."

You can have two people that each have $20k in annual income and both have $70k in total credit lines.  Both apply for another line of credit... one gets it, one doesn't and the one that doesn't reads the reason as being income doesn't support it when IMO it should state that something in the profile is preventing it and the majority of the time it's not going to be income.

Someone with $20k in annual income after taxes and regular expenses is likely going to have next to nothing left in most cases, right?  So next to nothing "supports" $70k in combined credit lines?  That person could put $1000 on 4 or 5 different cards and struggle to even make all 4-5 minimum payments.

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Not all expenses are the same (from someone that started around 19k three years ago).  Still had plenty of money to spend (ask Amazon).  Then, could not buy a phone outright, now can.  One can even build up an investment portfolio on that income, while paying one's own rent.  Granted, I would not (and still do not need to) buy a car, with all the expenses related.  If you prioritize, lower incomes can still reach goals.  Just to add, not looking for income just shy of six figures (unless it falls in my lap ), but enough to build up an Ira or two, savings and investments for fifteen years.  And, if I can convert a card or two, then I am done with credit seeking.  Already closed Arrival, and sent over to Sallie Mae.  Next January, probably ditch AARP (or Freedom if it is nerfed).  Want fewer cards with higher limits (income mid 30k).