With a $30,000 salary you can expect a minimum credit limit of $2,596 across all credit cards1. This means if you already have a card, simply subtract its limit from $2,596 for an estimate of what you’ll get on the second card. Keep in mind the average credit limit granted on new cards is $3,176. Because $30,000 is below the average salary, you should expect less than $3,176 in credit.
How Much Credit to Use on $30k / Year
Use under 30% of your credit limit but never more than ~$10,500 (35% of income), and obtain as much available credit as possible.
There are two credit balances you should keep in check. The first is available credit (max amount allowed for use) and the second is used credit (debt). For revolving mechanisms such as credit cards you should maximize available credit. There’s no reason to forego access to credit.
That said, you should never use more than 30% of it. The lower the better. I never go above 15%, and many advisors suggest keeping use between 1% and 5%. This is called the “utilization rate” and its a key metric on your credit report.
For loans, it’s a good idea to get about 30% of your income to purchase appreciating assets like real estate and always pay on time. This 30% includes outstanding debt on revolving lines.
The reason this is so important is it communicates to lenders that you’re trustworthy, can responsibly use credit, and that you’re building personal assets. With this approach and no delinquencies, your credit is bound to improve.
How Credit Limits are Determined
Lenders look at your credit score, your income, and your personal assets (aka collateral)… but in different ways.
They make 2 decisions when you apply for a credit card. The first is approval, and the second is credit limit. Approvals are binary, meaning it’s either yes or no. They use the factors above to weed out profiles that don’t meet their standards.
Credit limits, however, can be dynamic or binary.
Binary credit limits are linked to application approval. Approval-linked cards results in an identical credit limit for everyone. For example, secured credit cards with $200 limits are the same for every cardholder.
Second, ranges can determine limit. For example, imagine a range of $500 to $1,000 credit. An example of how the range applies is credit scores below 620 receive $500, scores between 620 – 760 receive $750, and scores above 760 receive $1,000.
Finally, a combination of credit score, income, and collateral can determine limit. This requires manual intervention from a lender and usually applies to borrowers with above-average financials. Lenders want to see exactly how you have handled similar scenarios in the past, so they’re take a granular look at all the data you and the credit bureaus make available.
For example, someone earning $250,000/year with an 820 credit score can receive as high as $30k in revolving credit, but the lender determines this on a case-by-case basis using detailed information about sores, income and assets from the borrower’s past.
OK, but what does all this mean for a $30,000 salary?
How Salary Impacts Credit Limit: Debt-to-Income (DTI) Ratio
In general, every $1,000 increase in salary equates to roughly $150 – $450 increase in max credit use. With $30,000 in annual income, you should expect a maximum of $13,500 in debt for all of your loans and cards. That said, revolving credit usually maxes at $4,500 standalone.
Many consumers falsely believe credit scores are the only metric that influences credit limit. In reality, it’s only one of three considerations, and income is the second most important.
I saw this first hand with the Apple Card. The application requests your income in addition to checking your score. I was instantly approved but my kid sister, who has zero income, got nothing.
So yes, salary increases your credit limit and it’s a very real part of most credit card applications today. Some of the more traditional lenders don’t immediately request it, but that’s slowly changing.
BUT, it only matters when salary is a criteria in the application. Secured cards that only look at scores can deny even high-income applicants, for example.
If it works, by about how much can you expect your limit to increase?
Your debt-to-income ratio (which measures percent debt of total income) must remain under 45% at most and 35% on average. Most people keep credit card debt + outstanding balances under 15% of their income.
Altogether, this means every $1,000 increase in salary equates to roughly $150 – $450 increase in maximum credit limit.
Credit Limits Higher than Salary at 30k
It’s definitely possible to end up with more available credit than income. The obvious scenario is when you lose income with a job change/loss. Another example is credit lines for pre-revenue LLCs used to improve the company’s credit score.
Otherwise, it’s very rare because lenders almost always require a debt-to-income ratio under 40%. There’s a reason for this, so let me be clear: it’s not a good idea to use credit higher than your income, but there’s no harm having available credit higher than income.
Calculation Methodology
The only public dataset with credit limit data is the Federal Reserve’s SCE Household Finance Survey, but its questionnaire makes this information optional and it’s not included in the output data. The SCE does, however, provide outstanding debt and balances, so we can easily calculate the minimum.
Credit limit = existing debt + outstanding balance + remaining credit. Bringing remaining credit to the left side of the equation, the minimum credit balance equals existing debt and outstanding balance.
According to data from the Federal Reserve, consumers with an annual income of $28,000 – $32,000 have a mean credit card balance of $1,295 and a a mean outstanding debt of $1,301. Together, this means they have a minimum total credit limit of of $2,596 on average.
Key Takeaways
- Expect between $2,596 and $3,176 credit limit with a $30,000 salary
- Keep used debt under $10,500 with a $30k salary
- Get as much available credit as possible
- Expect between $150 – $450 credit limit increases with each $1,000 of income
