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New Contributor
Posts: 66
Registered: ‎05-01-2009
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Credit Limit Increases-Good or Bad?

I recently read somewhere that having your credit limits raised on your credit cards will increase your score, as long as you don't increase the balances on them. Is this true, and if so how many points are we talking about here?

Valued Contributor
Posts: 3,302
Registered: ‎06-09-2010
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Re: Credit Limit Increases-Good or Bad?


dodgehilton wrote:

I recently read somewhere that having your credit limits raised on your credit cards will increase your score, as long as you don't increase the balances on them. Is this true, and if so how many points are we talking about here?


Having your CLI on your credit cards does not guaranty an increase to your scores, but is possible to increase your scores. Sometimes it can even ding your scores from the INQ if it is a hard pull. No way to determine how much if anything your scores would increase, to many different factors to be considered.

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Valued Contributor
Posts: 1,669
Registered: ‎05-24-2007
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Re: Credit Limit Increases-Good or Bad?

Increased credit limit increases you FICO score indirectly. If you have the same balances, then higher limits lowers your utilization. Lower utilization is what tends to increase your score.

Mega Contributor
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Registered: ‎03-19-2007
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Re: Credit Limit Increases-Good or Bad?

I agree that, like all things related to credit scoring, "it depends!"

 

On the positive side, there is little question that, from a purely computational point of view, increased CL will increase the demonimator in your % uti calculation.  Thus, with all other things being equal, reduced % util is obtained.

 

However, on the negative side, requesting an increase in CL will almost always, in the consideration process, cause the creditor to pull your CR. Many code those requests for increased credit as a hard inquiry, which will, at least temporarily, lead to five-point-or so ding.  Since that impact is short-lived, if you are not planning to actually app for new credit within the next six months or so, its immediate FICO impact will usually be worth the slight ding.

 

In my opinion, the most important factor is human nature.  Many consumers, once obtaining a CLI, will consider it as more credit available to them, and will often quickly use up the new CLI benefit by increasing account balance until the % util is back near what it was without the CLI.  If you use the CLI strictly for the purpose of reducing % util and refrain from a concurrent increase in account balance, it will be a long-term plus.  The key is thus, in my opinion, not so much in getting the CLI, but in how you use it.  Increased credit is not always desirable.  Low balances are always desirable.

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