Increasing credit limit?

[Teresa Pitman]

I have two credit cards. I just got a letter from one offering to increase my credit limit.

I pay my credit cards off most months, but sometimes (my income is erratic) it takes me three or four months to pay it back down to zero. I am never anywhere close to my current limit. I'm not worried that having a higher limit will encourage me to spend more.

Would you increase it or not? My thought is that it might be handy to have more credit in case of an emergency. But not if it will affect my credit rating in a negative way.

Does it hurt or enhance your credit rating to have a higher limit?

Teresa

 

[DisneyEater]

This is a diffucult question that I am not sure can be answered accurately here. The short version is this: Open revolving credit decreases your score but low utilization increases it, so it is hard to know what is better for your situation.

 

[scrapquitler]

I have two credit cards. I just got a letter from one offering to increase my credit limit.

I pay my credit cards off most months, but sometimes (my income is erratic) it takes me three or four months to pay it back down to zero. I am never anywhere close to my current limit. I'm not worried that having a higher limit will encourage me to spend more.

Would you increase it or not? My thought is that it might be handy to have more credit in case of an emergency. But not if it will affect my credit rating in a negative way.

Does it hurt or enhance your credit rating to have a higher limit?

Teresa

I suppose you could look at it two different ways, and it depends on your situation.

1. Too much available credit can damage your score (we had a loan declined once because we had a large credit limit on a card we almost never used).

At the same time 2. Using too much of your available credit can damage your score because it makes you look like you can't repay it.

You also need to consider the amount (in %) of the increase. It might be worthwhile to increase your limit from $1000 to $2000 if you need to ustilze the credit for your expenses sometimes. On the other hand, if they want to increase your limit from $18,000 to $20,000 there might just be no point to it.

Personally, I usually call them and ask them NOT to increase my limit when I get one of those letters. But my limits are already WAY higher than any amount I would ever want to charge. Remember that if you are a customer in good standing and something comes up that you need to charge something above your limit (for example you are boooking an expensive trip or buying a lot of furniture), most of the time they will increase your limit if you request them to do so.

 

[Teresa Pitman]

Personally, I usually call them and ask them NOT to increase my limit when I get one of those letters. But my limits are already WAY higher than any amount I would ever want to charge. Remember that if you are a customer in good standing and something comes up that you need to charge something above your limit (for example you are boooking an expensive trip or buying a lot of furniture), most of the time they will increase your limit if you request them to do so.

Well, that's good to know. I think I will just leave it where it is, then.

Teresa

 

[Bell30012]

I bought a dining room table set at Rooms to Go. They approved me for instant credit at some huge limit. I still only bought the table that I'd planned to purchase. Paid it off with zero interest within 90 days.

That $10,000 credit line however caused my utilization versus available credit to plunge down to about 4%. My score went up 30 plus points in just a couple of months.

 

[dclfun]

I usually take the additional amount. I figure if I did need to charge more then I'd have a lower debt to credit ratio.

 

[Cheshire Figment]

The utilization ratio has a very high effect on score. If your limit is increased, the ratio goes down and the score goes up.

 

[MarkC]

TAKE IT! It will INCREASE your score, as it will show that you are using an even smaller percentage of your total credit available to you and can manage your credit well, even with the temptation of a higher credit limit.

The only time you would EVER ask to decrease it or deny an increase is if you were thinking about applying for a line of credit elsewhere (thereby, you wouldnt want this one hindering that ability).

You can always have them lower your credit line if for some reason you arent comfortable with it - but you cant do the reverse normally, so take advantage of the opportunity while they offer it to you.

Would you increase it or not? My thought is that it might be handy to have more credit in case of an emergency. But not if it will affect my credit rating in a negative way.

Does it hurt or enhance your credit rating to have a higher limit?

Teresa

 

[MarkC]

I suppose you could look at it two different ways, and it depends on your situation.

1. Too much available credit can damage your score (we had a loan declined once because we had a large credit limit on a card we almost never used).

This is a complete fallacy. Too much credit will NEVER damage your score.

What happened in your case was, that the loan officer reviewed your file and felt you were a risk because you had a large amount of open revolving credit. THIS HAD NOTHING TO DO WITH YOUR SCORE, however (not yelling..lol, just trying to highlight the point here). Your score was probably great, but the limit caused the officer some reservation of approving the line of credit. You are confusing your score with the independent analysis that loan institutions perform before approving credit. The raw score is just one indicator that is used to approve credit.

At the same time 2. Using too much of your available credit can damage your score because it makes you look like you can't repay it.

EXACTLY which is why a credit line increase always helps your score assuming you dont use it to charge more than you can afford.

Remember that if you are a customer in good standing and something comes up that you need to charge something above your limit (for example you are boooking an expensive trip or buying a lot of furniture), most of the time they will increase your limit if you request them to do so.

This is not true at all anymore. Ever since the credit "crisis" of 2006-2007, banks are leery of anyone calling in asking for a temporary credit increase, as it's a major sign of impending trouble. AmEx, specifically, cut down on this practice and often refuses such requests now. This is not something to count on, which is why, if you have the offer to increase your credit line....TAKE IT.

 

[MarkC]

This is a diffucult question that I am not sure can be answered accurately here. .

+1. There is way too much information posted on here by well-intentioned, but mis-informed members on how credit works that can easily mislead the OP.

Your credit scores is one of the most important numbers you have - if there are serious questions about it, I'd seek the advice of a credit counselor before taking any advice on here.