Credit card companies impose credit limits, which set the maximum balance a cardholder can maintain at any given time. Credit bureaus calculate credit scores based on several factors, each with its own importance. Nearly 30 percent of your credit score depends on the ratio of debt compared to your available credit, essentially the amount of debt you owe, according to MyFico.com. Raising your credit card limits can reduce the available-credit to debt ratio, or utilization ratio, and subsequently improve your credit score. However, understand that an increased credit limit often comes with higher over the limit fees, and an increased desire to spend beyond your means.
Exhibit Good Financial Habits
Demonstrating you are a responsible spender is the number one way to convince your credit card company they can trust you with a limit increase. Pay all of your bills on time to repair and maintain a positive credit rating. Payment history makes up 35 percent of your credit rating, says MyFico.com. Your credit card company will take note of how you manage your payments not only with them, but with other companies as well. Keep your utilization ratio below 30 percent because a higher ratio communicates that you are living beyond your means, and increasing your credit limit could be a risky move for the credit card company.
Request a Credit Increase
The easiest method to get a credit card limit increase is to simply ask, says MSN Personal Finance Writer Stacy Johnson. Call the number on the back of your credit card or on your credit card statement and request an inquiry for a credit limit increase. The credit card company may send you a form to complete, but most credit card companies will go ahead and run a credit check to determine if you are a viable candidate for an increase. The credit card company will send you a written notice of the increase in your credit limit, if they grant one.
Request all Limit Increases within 14 Days
Note that requesting a higher credit card limit does prompt a credit inquiry, which can briefly lower your credit score. If you plan to make requests to increase credit card limits from multiple companies, this could have a larger impact on your score. Offset this issue by making all of your limit increase requests within a 14-day timeframe. Like mortgage or auto inquiries, multiple credit card limit increase requests made within a 2-week period count as one inquiry. Avoid opening new credit accounts or closing old ones during this time to keep your credit rating as high as possible.
Avoid Too Much Credit
Not only can too little credit affect your future credit, having too much credit could communicate a risk as well. A higher credit limit could lead to an increased annual percentage rate (APR) and monthly fees. In the event a higher credit limit poses a problem, you can ask your credit card company to reverse the limit increase.
0 comments:
Post a Comment