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Credit Line increases

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New Contributor

Credit Line increases

How does a credit line increase actually help your credit? I just had my Discover card graduate from a $300 CL to a $2000. My wife is worried it will ruin our ability to get a home loan.

Message 1 of 18
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Frequent Contributor

Re: Credit Line increases

Credit line increases (referred to here as CLI's) increase your total credit limit across all credit cards. This, in turn, increases your overall utilization %. 

 

Let's say that was the only card you own... (just for example):

@ $300 CL - your ideal 10% utilization would be only $30 or less, carried to statement

@ $2,000 CL - your ideal 10% utilization would be $200 or less, carried to statement

 

As far as the mortgage loan, a CLI will have no negative effect. This, because Discover increases occur as SP increases. If it were a HP increase, then that's what you don't want the mortgage loan to see. Actually it will more likely have a positive effect because you have increased your available credit and utilization, which in turn lowers your minimum monthly payment on any balances. This helps your DTI ratio.

 

As long as there are no HP's (whether new apps or CLI's) then no worries for the mortgage loan. I'm currently going through the same thing.

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Message 2 of 18
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New Contributor

Re: Credit Line increases

Thank u for the info. What is HP vs SP?

Message 3 of 18
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Established Member

Re: Credit Line increases

Shouldn't that be DECREASES your overall utilization percentage?

If you have a $1000 CL a $100 charge would be 10% utilization.

If your limit is raised to $2000 that same $100 charge would be 5% utilization.



Starting Score Jan 2020: EQ: 743 TU: 694 EX: 666
Current Score - May 2020: EQ: 692 TU: 697 EX: 736
Goal Score: 740 MIN ACROSS THE BOARD!


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Message 4 of 18
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Valued Contributor

Re: Credit Line increases

Hard pull vs soft pull. Hard pull is an inquiry that dings your credit temporarily, effecting scores up to 1 year and stays on your report for 2 years (depending which bureau the lender pulled) whereas soft pulls have no affects on your credit.





My Cards:






Profile Type: New, Thick, 100% Clean
INQ's: EQ: 0 TU: 1 EX: 3 (last 12 mo.)
Recent Accounts: 4 (last 24 mo.)
Total CL: 28.95k Util. 3% AAoA: 1yr, 8mo.
AoOA: 2 yrs, 8 mo. AoYA: 0 mo. 100% PIF.





myFICO Member since: July 21, 2018 | Joined Community: Aug. 17, 2018 | Starting Scores: EQ: 716 TU: 738 EX: 698
Message 5 of 18
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Community Leader
Senior Contributor

Re: Credit Line increases

You are correct. Utilization decreases, available credit increases.



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TCL $85,100| Agg. Util under 5%
Message 6 of 18
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Frequent Contributor

Re: Credit Line increases

@Journey2019

 

Technically, yes....I meant "decreases" your overall utilization.

 

I think my comment was meant to imply that it positively increases your utilization posture. Good point though, I don't want to confuse anyone. Thanks!

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Message 7 of 18
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Valued Contributor

Re: Credit Line increases

Your wife's concern might have something to do with too much available credit.  2K limit on a card shouldn't be an issue. If you have a ton of cards, it might add some bloat to your unused credit.

Scores, HPs/24 mos. (updated 10/09/20):
    Experian FICO Score 8 = 825, 1/24
    Experian FICO Score 9 = 813, 1/24
   TransUnion = 815, 1/24
    Equifax = 819, 0/24

Total 2019 rewards, incl. offers/deals = $1,709.07
Avg. rewards rate, incl. offers/deals = 3.92%

Total CL: $247,000

Cards (hover over for CL | interest rate | Date Opened):
Message 8 of 18
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Moderator

Re: Credit Line increases


@CardNut wrote:

Your wife's concern might have something to do with too much available credit.  2K limit on a card shouldn't be an issue. If you have a ton of cards, it might add some bloat to your unused credit.


+1.  That's not even on the radar for "too much available credit."  If you had $400,000 of revolving credit available on a $25,000 income or something that is where it would be more likely to be an issue.

Message 9 of 18
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Established Contributor

Re: Credit Line increases

In my opinion, credit limit increases (resulting from a SP) are never a bad thing, and always a good thing. The only exception to that, that I can think of, is if someone has poor self-control and immediately uses the new credit limit to buy stuff they can't immediately pay off.

 

Higher credit limits mean that, assuming your balance doesn't change, you're using less of your available credit, which substantially improves your credit rating.

 

Theoretically, there is such a thing as having "too much" available credit, which can hurt your chances of approval for things, but most people are nowhere near that point. Usually that would require many 10's, or even 100's, of thousands of $$ in available credit. At $2k, you're fine.

    Total Loan Balance: $28k / $70k

    Total SL: $41.2k
Goal cards:



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