topic Re: Does a pay cut mean instant CL decrease? in Credit Cards

Does a pay cut mean instant CL decrease?

jimnorton — Fri, 25 Jun 2021 00:08:14 GMT

Hello all,

I had a question on whether a lower income will mean a lower limit from some providers. For a little background, I'll give my situation and if anyone with knowledge on the topic can put my fears to rest, I will love you for it!

So I have about $75k in credit limits across 8 cards and I always stay at or under 1% utilization. For the last 3 or so years, my income was $35-40,000 a year approximately and I've never had a limit decrease. Next month I will be taking a job that figures to about $19,000 a year, so lower income (but lower stress work too)! I haven't updated this info to my credit providers but I know that I will have to whenever I apply for a new card and definitely don't want to lie on an application.

I know any card issuer reserves the right to increase/decrease a limit at their discretion without necessarily having to give an explanation. That being said, has anyone experienced or heard about credit limit decreases resulting directly from lower income or a pay cut. Thank you all in advance!

Re: Does a pay cut mean instant CL decrease?

GatorGuy — Fri, 25 Jun 2021 00:35:28 GMT

As long as you use credit responsibly then they don't even need to know.

Re: Does a pay cut mean instant CL decrease?

Gunnerboy — Fri, 25 Jun 2021 00:51:28 GMT

@jimnorton ,

As @GatorGuy said, keep using your credit responsibly, plus "if they don't ask, don't tell them".

Re: Does a pay cut mean instant CL decrease?

blindambition — Fri, 25 Jun 2021 00:51:40 GMT

You aren't obligated to update income, even when they ask annually. However, you would provide accurate income when applying. If you have other cards with that lender, action may be taken. A denial, some limit from other card to fund new card, decrease on other cards. Depends on lender, their formulaic protocol, and of course, your overall profile.

A lender may also choose to do FR in future, so keep that in mind.

Re: Does a pay cut mean instant CL decrease?

Horseshoez — Fri, 25 Jun 2021 01:02:07 GMT

@jimnorton, my thoughts are a bit different; given you have a very substantial amount of available credit relative to your recent income and certainly relative to your new income, in your shoes I'd simply hold off applying for any new credit unless or until your income goes back up (don't know if that is your plan for the future or not).

Re: Does a pay cut mean instant CL decrease?

Anonymous — Fri, 25 Jun 2021 01:02:31 GMT

You would be surprised how much credit creditors can be comfortable extending to low incomes. It's much more about your profile than your income. My income is similar to yours and my cards range from my $800 Target card to $19,000 NFCU Platinum with an average of around $7K. Most creditors are comfortable with at least 20% of my income in limits and in the case of NFCU, I'm at almost 170%.

As others have said, you don't have to update them, although I personally would recommend it. Better to be honest about it now rather than deal with it later and if you ever have to file for BK, the fact you didn't update your creditors to such an income drop may not be helpful.

Re: Does a pay cut mean instant CL decrease?

AverageJoesCredit — Fri, 25 Jun 2021 01:15:03 GMT

@Horseshoez wrote:
@jimnorton, my thoughts are a bit different; given you have a very substantial amount of available credit relative to your recent income and certainly relative to your new income, in your shoes I'd simply hold off applying for any new credit unless or until your income goes back up (don't know if that is your plan for the future or not).

Having low income should not nor does not prevent one from applying for credit. Life happens. Just put your current income on any new applications. Lenders will suprise you with approvals if your overall profile is in good standing.

Re: Does a pay cut mean instant CL decrease?

Horseshoez — Fri, 25 Jun 2021 01:28:09 GMT

@AverageJoesCredit wrote:
@Horseshoez wrote:
@jimnorton, my thoughts are a bit different; given you have a very substantial amount of available credit relative to your recent income and certainly relative to your new income, in your shoes I'd simply hold off applying for any new credit unless or until your income goes back up (don't know if that is your plan for the future or not).
Having low income should not nor does not prevent one from applying for credit. Life happens. Just put your current income on any new applications. Lenders will suprise you with approvals if your overall profile is in good standing.

Understood, but that wasn't even remotely my point.

Re: Does a pay cut mean instant CL decrease?

jimnorton — Fri, 25 Jun 2021 02:25:05 GMT

@Horseshoez Thank you all for the input! I don't really plan on applying for a card soon (my last application was Nov 2020) so that's what I was thinking as well.

It is also a useful tip to only update any new perspective issuers only where you will apply to, and not have to update everyone else. All good stuff, and I think it's pretty universally agreed to always give accurate info when applying for a NEW card. Thanks again but feel free to add any other input for general reference!