This story is part of CNBC Make It's One-Minute Money Hacks series, which provides easy, straightforward tips and tricks to help you understand your finances and take control of your money.
If you've recently earned a raise, consider reporting that information to your banks and credit card lenders – it could increase your credit score.
By reporting your increased income, you'll likely qualify for an automatic credit limit increase on your existing loans or credit cards. If it isn't automatic, you can request one with your bank or lender. Additionally, you'll improve your chances of qualifying for other credit cards and loans.
Your credit limit matters because 30% of your credit score is based on something called "credit utilization," which measures how much total credit you use versus how much you have available. The more credit you have, the better it is for your credit score, as it indicates that you are a responsible borrower to lenders.
By reporting your newly increased income, you could grow your existing credit limit, which in turn, would shrink your credit utilization ratio and raise your higher credit score.
The advantage of a higher credit score is that it can qualify you for lower interest rates on new credit cards and loans. While the interest rate you pay for existing loans and credit cards likely won't change automatically, you can also try calling your lender and asking for a reduced rate based on increases to your income or credit score. They might say no, but it's worth a shot since it will reduce interest payments on outstanding balances charged to the card.
And updating your income is easy: Simply call your bank or lender directly and report the updated information. Many lenders allow you to update your income on their websites as well.
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 earn lower interest rates. The best part is that it doesn't require much effort, as it only takes a few minutes to do.
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