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New Member
Pang
Posts: 3
Registered: ‎10-18-2013
0

Credit Line Increase always good for credit?

I've been seeing a lot of advice that having a higher revolving credit limit would help my score, but I'm not sure if that's true, and I also worry about the hard inquiry I'd take if I request an increase (my bank has confirmed that it would be a hard one).  

 

And although several sources say higher credit = higher score, the myFico score generator suggests my score will go down if I opened a new card.  (I'm actually thinking of doing a CLI, not a new card, but that wasn't an option in the simulator.  Is there a difference?)

 

I pay all my balances off every month, so my utilization ratio isn't going to change very much no matter how high the limit goes :smileyhappy:

 

By way of background, I'm getting ready to apply for home mortgages (in the next 12 months or so) and checked in on my credit scores for the first time in my life.  It turns out, I'm pretty good?  Equifax = 758 (yesterday) 777 (today?!), Experian 741, Transunion 820.  I have on hard inquiry that's about to expire for a home mortgage pre-approval and two or three missed payments from 2008, nothing else negative at all.  I have $19k in revolving credit lines open, I carry a reported balance of <$200 (I pay my cards in full every month), and I have a couple open student loans that are all in good standing.

 

$19k in credit lines seems like a ton, especially since I don't use any of it, but I have the income to support a higher limit if I wanted it.  Is getting an increase going to help my score?  Is it worth the hard inquiry?  Transunion's website, specifically, analyzed my report and cited my lack of sufficient revolving credit as a negative factor.  (They also said my oldest credit card, from 2003, is too recent, so.. not sure what to believe there).  Equifax seems to think my amount of credit is "Great".  Experian liked that my credit line was above $5000, but unclear if I would get extra points for overachieving there :smileyhappy:

Mega Contributor
RobertEG
Posts: 17,456
Registered: ‎03-19-2007
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Re: Credit Line Increase always good for credit?

It's a good idea if you have restraint.

 

Creditrs dont grant credit limit increases out of motivation to help consumer credit scores.  They grant because statistics show that most consumers will continue their prior patttenr of use of available credit (i.e., % util) after obtaining a CLI.  Hard to break old habits.

Thus, they get more interest, on the average.

 

If you use the existing CLI but maintain the $ amount of charging, as opposed to the % util of CL, you will get a score boost.

The creditors are betting that you dont have that willpower........

New Member
Pang
Posts: 3
Registered: ‎10-18-2013
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Re: Credit Line Increase always good for credit?

That makes sense, thanks for the response Robert!  I see your point that it's not really in the CCC's interest to extend me credit if I'm not going to use it, but as you say, they assume that I will.  I've had the 19k limit for a few years now and have never failed to pay my balances in full each month, so I don't think raising it any higher is going to change anything.

 

I guess my concern remains, though, that since I'm currently at <1% utilization, if I raise my credit limit further, I'm still going to end up at <1%, so my utilization is already sort of topped out and isn't going to change much.  Meanwhile, I will have a hard inquiry on the report.

 

So perhaps it boils down to -- assuming ~0% utilization, is there still any credit score benefit to having a higher credit card limit, or am I just hurting my score by having newly issued credit (even if on an existing card) and having a hard inquiry?

 

Anyone have thoughts?

 

 

Valued Contributor
AndySoCal
Posts: 1,895
Registered: ‎04-07-2009
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Re: Credit Line Increase always good for credit?

A credit limit increase will help your score to the exent it helps your credit utilization. If you credit utilization is below 10% it will not help at all. There is nothing in the FICO score calculation that gives you points for higher credit limits nor does it deduct points ofr lower credit limits..

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New Contributor
Cprman
Posts: 62
Registered: ‎05-04-2008
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Re: Credit Line Increase always good for credit?

I think the most important thing is you want to get a mortgage relatively soon. The number one reason to get excellent credit is for your mortgage rate as even fractions of a percent leads to thousands of dollars in the long run.

 

You already have excellent credit scores. If you don't need more credit I would say hold off on any activity. Even a single hard pull can mean the difference. Furthermore with another year of aging and some old derogs that will be older your age will be longer and your scores likely some what higher.

 

Usually unused credit doesn't matter that much but these days getting a mortgage is more than just a FICO score. Ie job history, income, other debts...

 

Once you have a mortgage btw it will also really help your credit score as long as you pay on time.

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Regular Contributor
bobebob
Posts: 246
Registered: ‎08-14-2011
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Re: Credit Line Increase always good for credit?


Cprman wrote:

I think the most important thing is you want to get a mortgage relatively soon. The number one reason to get excellent credit is for your mortgage rate as even fractions of a percent leads to thousands of dollars in the long run.

 

You already have excellent credit scores. If you don't need more credit I would say hold off on any activity. Even a single hard pull can mean the difference. Furthermore with another year of aging and some old derogs that will be older your age will be longer and your scores likely some what higher.

 

Usually unused credit doesn't matter that much but these days getting a mortgage is more than just a FICO score. Ie job history, income, other debts...

 

Once you have a mortgage btw it will also really help your credit score as long as you pay on time.


+1.  The HP will hurt you in the short term and you really want to maintain your score until your mortgage is a done deal.

 


AndySoCal wrote:

A credit limit increase will help your score to the exent it helps your credit utilization. If you credit utilization is below 10% it will not help at all. There is nothing in the FICO score calculation that gives you points for higher credit limits nor does it deduct points ofr lower credit limits..


The part about Util is true, but I once had a comment on my score that read:

"The available credit on your open revolving accounts is too low. 

Having credit available to you is a sign that you are able to manage your finances responsibly.  Lenders usually like to see that consumers have a large amount of credit available to them."

 

I believe that this comment was directed at my Walmart Discover Card which at the time had a limit of $2,800 while all my other accounts had limits of $10,000 or more.  This was from a TransUnion report.

 

In general, higher credit limits are associated with higher credit scores.  You can debate whether or not the chicken or egg came first, but the two do correlate.  Long-term it would probably be helpful to have a higher credit limit on your accounts, both to your score and to increase the likelyhood of creditors offering you new and higher limits.

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Valued Contributor
AndySoCal
Posts: 1,895
Registered: ‎04-07-2009
0

Re: Credit Line Increase always good for credit?

availible credit % = 100 - credit utilization. The score factor has more to do the low availible credit percentage cause by higher credit utilization.  It is not treferring to your credit limits. Lower your creidt utilization and the message shouldgo away. Here is a link to FICO score factors

http://www.scoreinfo.org/FICO-Scores/Pages/Score-Factors.aspx

 

Equifax My FICO score 815 5/28/2012, 818 on 7/28/2014 . Average of Accounts 12 years and no Installment accounts. MyFICO TU 810 6/26/2012 809 4/21/2013 MyFICO XPN -805. 2/26/2014 Discover TU FICO 813 App free since 9/2011
Frequent Contributor
Roarmeister
Posts: 329
Registered: ‎04-21-2012
0

Re: Credit Line Increase always good for credit?

You're right.  A CLI will have little impact positively on your score.  You have a pretty decent score that should give you lowest interest rates for future credit seeking.  I honestly don't see a downside though.  Being conservative in your outlook is usually a good thing and doing all the little things right, even increasing your CL is just good gardening.

 

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New Member
Pang
Posts: 3
Registered: ‎10-18-2013
0

Re: Credit Line Increase always good for credit?

Thanks, everyone, for all the helpful advice!

 

What got me started thinking that I ought to increase my credit line was the exact same comment bobebob mentioned, "The available credit on your open revolving accounts is too low."  But what many of you have said about how utilization is more important than total credit limit makes sense, and my utilization is already tiny (a few hundred dollars out of $19k).  

 

Since I don't actually need the CLI for use, and since there would be a hard inquiry that would lower my credit scores, and since the score benefit of a higher CLI is dubious (?) given the low utilization, you've helped me change my mind and I'm not going to request the CLI after all.

 

Interestingly, I've also read that when you have a more or less clean credit history, the Tranunion site (which is the one that told me my limit should be higher) can sometimes grasp at straws in trying to give you useful feedback.  So maybe that's what happened.  The same Transunion site told me my oldest credit card was opened too recently (it's been 10 years!) and that I have "too many" inquiries (I only have one!).  I'm sure having an even older credit history and having zero inquiries is better and will raise my score but I get the sense that the real things keeping my scores from being higher are the few late late payments from 2008 and the lack of a mortgage (as you guys have pointed out).


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