This story is part of CNBC’s Make It’s One-Minute Money Hacks series, which provides simple, straightforward tips and tricks to help you understand your finances and take control of your money.
If you recently got a raise, consider sharing this information with your banks and credit card lenders – it could boost your credit score.
By declaring your increased income, you will likely qualify for an automatic credit limit increase on your existing loans or credit cards. If this is not automatic, you can request it from your bank or your lender. Plus, you’ll increase your chances of qualifying for other credit cards and loans.
Your credit limit is important because 30% of your credit score is based on what’s called “credit utilization,” which measures the total amount of credit you’re using versus how much you have . The more credit you have, the better it is for your credit score, as it signals that you are a responsible borrower to lenders.
By declaring your newly increased income, you could increase your existing credit limit, which would reduce your rate of credit utilization and increase your credit score.
The benefit of a higher credit score is that it may qualify you for lower interest rates on new credit cards and loans. While the interest rate you pay for existing loans and credit cards probably won’t change automatically, you can also try calling your lender and asking for a lower rate based on your increased income or your credit score. They might say no, but it’s worth it because it will reduce interest payments on outstanding balances charged to the card.
And updating your income is easy: just call your bank or lender directly and report the updated information. Many lenders also allow you to update your income on their websites.
Updating your income with lenders, especially if you haven’t done so in years, is one of the easiest ways to improve your credit score and get lower interest rates. The best part is that it doesn’t require much effort as it only takes a few minutes.
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