Time to ask your credit card companies for a gift - a credit limit increase. I have a detailed post on why you want to do this here, but the short version is:
- Increasing your credit limit, decreases your credit utilization, which increases your credit score. See the above referenced post for why.
- This assumes you do not go out and spend your new credit. If you can't control yourself, don't do this.
I got my credit limit increased by $3,000 on one card and $6,000 on another. My wife had an unsolicited credit increase on one of her card at the end of October, so I didn't need to try to increase that card and I scored a $5,000 increase on her other card.
Both of our Discover cards increased our credit limit without performing a credit check. It was a simple on-line request that was approved instantly. My Chase card did perform a credit check - I think. I had to email their customer support asking for the increase and, as part of that process, I said I agreed to them pulling my credit report. A couple days later, I got a report from my credit monitoring service saying Chase performed a credit check, so I know they actually did pull my report.
I have one other credit card, from Bank Of America. They said they would need to pull my credit report and I opted to not go forward with that one. It's a card I almost never use. In fact, I only got it to use on a trip overseas two years ago. I figured the benefit of the higher credit limit for a card I rarely use would not be worth the temporary credit score hit of a second hard credit check.
Take a minute or two before the holiday craziness kicks in and ask for a Christmas gift for yourself this year. It sounds counter-intuitive, but a credit limit increase can actually improve your credit score!
If you plan on getting a new loan or refinancing, you should not do this. In a case like getting a new mortgage, you probably want to reduce your credit limits. The reason being is that the potential lender will see that you have a lot of credit available elsewhere, and will see this as a higher risk since they'll see that you could technically be obligated for a lot of payment elsewhere.
ReplyDeleteThere's two issues here. If you are getting a new loan or refinancing, don't request the increase if the card company will perform a hard credit check. Too many of those in a short period of time may temporarily drop your credit score. But if they will increase it without a hard check (or with a "soft" check), go for it.
ReplyDeleteI completely disagree with lowering your credit limit. This will actually INCREASE your credit utilization percentage, which will lower your credit score as you will appear to have all your credit cards close to maxed out. See my earlier post referenced in the first paragraph.
Raising your credit limit will lower the credit utilization which will raise your score. But, you are correct in that you will appear to a new borrower to have more credit available to you, thus be at a higher risk of running up charges. So it comes down to which plays a bigger role: credit utilization percentage or total available credit? The credit agencies won't tell you, since it's a proprietary formula, but from what I have read and experienced, the lower credit utilization ratio is more important.
The best situation is to request an increase 3 to 6 months before applying for a new loan. That gives you time to show you can handle the increased credit without maxing it out.