I get asked this question alot - I personally like to go by Jim Woffords rules:
1) You ride a full season at 1 level competantly
2) You place top 3 in minimally 3 HT's
I see far too many jumping up in levels, before they are ready - ending up in disaster, either being getting hurt, or losing their confidence *either horse and rider or both* - and it is a shame and a great dissapointment to see this, especially for the sport. I hate to see people get hurt, and I especially hate seeing the horses get hurt.
I wish I had the Practicle Horseman where Jim wrote this excellant article, with many great points to it, where he discussed how many accidents are occuring due to fast move up's and unpreparedness.
But I do have a Practicle Horseman where this question was asked, and I really liked the answer:
"I'm a young rider who participates in Eventing. I will know when my young TB gelding is ready to begin showing when he can work in a decent rhythm and effectively carry a frame at all three gaits, and jump willingly and safely over fences
A horse and rider can move up a level when they have succeeded in their current level. If you are consistently winning, you are ready to move up. You should not move up if you haven't placed at a show, and you definitely shouldn't move up if you are unsafe in the jumping phases - pulling rails, cross country stops and runouts, the lack of effective half-halts are all warning signs.
However, it is essential that both the horse and rider are comfortable with moving up to the next level. Keep in mind that these beautiful animals are not machines and a fast move-up in levels can easily hinder their althetic ability and work ethic. Riders and their horses must be safe, smart and have fun"