Right now my gross total income is $60,000 per year. According to that what is the recommended credit range I should stay within? Is there a percentage of my income that my total credit should be? I’m looking to raise my credit score.
Before we get to the income:credit ratio part of the question I want to address the concern over the credit score. A credit score is a value in the range of 300-900 with higher scores being better. The value indicates how reliable companies think you are at paying back your debts. We’ve talked before about credit scores and how to raise them.
Something people tend to overlook is that credit scores are not all that important in Canada, in the big picture. They are one of several factors which go into determining how trustworthy lenders think you are. Your income, savings, employment history, and existing debts will all likely play as much (or more) of a factor when determining whether you can get a future loan. It is nice to have a higher credit score, but it’s not something over which you should lose sleep.
As for whether there is a range of credit you should stay within to match your income, my answer is: no, not really. There have been times in my life where I had credit limits which totalled about four times what I was making annually. The banks just kept offering me credit increases and I kept accepting them and my credit score kept going up.
It is possible to have so much credit that your credit score drops temporarily because your credit limit goes above what you could realistically pay back. However, that tends to get balanced out by your credit utilization (the amount you spend) being a smaller percentage of your credit limit (how much you could spend). As long as you are using your credit properly, not using more than you can pay back before the due date, your credit score should continue to rise, regardless of your income:credit ratio.
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