If you’re looking for an excuse to spend more using your credit card, you’ll need to do better than believing it will increase your credit score. Depending on how much more you spend, it could actually lower your score. And most credit card issuers don’t automatically raise your limit because you have embraced shopping full force. Although some credit card issuers might raise your credit limit after you’ve demonstrated you can pay your bills on time, you typically need to request an increase and be approved.
How Credit Scores Work
Five factors determine your credit score: your payment history, how much you owe, how long you’ve had credit, how much new credit you have been applying for and how diverse your credit is. The two biggest factors, which together account for 65 percent of your score, are payment history and amounts owed. To have a good credit score, you need to pay all your bills on time, and you should use only a percentage of your available credit.
Maxing Out Your Card
If you start spending more of your available credit than you have been, your credit score is liable to decrease because it affects the “amounts owed” category of your credit report. If you have a $10,000 credit limit, for example, you should use no more than 30 percent of your available credit, or $3,000, to have the best chance of raising your credit score. Future lenders will be less willing to lend to you if it appears you max out your credit card or are close to doing so. That sends a message that you might be in debt over your head.
How Credit Limits Work
Credit card issuers don’t want to give away their secret recipe, so to speak, for determining your credit limit. Justine Rivero, credit advisor for Credit Karma, gives some insight into what the likely formula is: how much you earn and your credit score. By spending more and thus lowering your credit score, you will be doing the opposite of what it takes to get a higher limit. Credit Karma crunched the numbers and found that it’s better to have a good credit score and a lower income than a bad credit score and a high income. What you do with the money you have is the primary factor lenders look for when determining how much credit to grant.
Raise Your Limit
The best way to get your limit raised on your credit card is to call or go online with your credit card issuer and request an increase. Get all your ducks in a row before you do so: Be able to demonstrate a history of paying your bills on time, have at least 70 percent available credit, and wait until you’ve had the card for at least a year before making the request. You want to avoid being turned down because that signals there was a problem. Plus, every time a company runs your credit because you apply for new credit or ask for an increase in your limit, your credit score drops a little, according to MyFico.
- CIBC: Requesting an Increase in Your Credit Limit
- MyFico: What’s In My FICO Score
- SmartMoney: 5 Factors That Determine Your Credit Score
- MSN Money: 4 Myths of Credit Card Limits
- Credit Karma: How a Credit Limit is Determined
- MyFico: Credit Inquiries
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- Consumer Financial Protection Bureau. "What's a Credit Inquiry?" Accessed April 15, 2020.
- Experian. "What Is a Hard Inquiry and How Does It Affect Credit?" Accessed April 15, 2020.
- Federal Trade Commission. "Credit Scores - What Can You Do to Improve Your Score?" Accessed April 15, 2020.
- Time. "This Man Has 1,497 Credit Cards and Near-Perfect Credit Score." Accessed April 15, 2020.
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- FICO. "The Importance of Credit History Length." Accessed April 15, 2020.
- Experian. "750 Credit Score: Is it Good or Bad?" Accessed April 15, 2020.
Laura Agadoni has been writing professionally since 1983. Her feature stories on area businesses, human interest and health and fitness appear in her local newspaper. She has also written and edited for a grassroots outreach effort and has been published in "Clean Eating" magazine and in "Dimensions" magazine, a CUNA Mutual publication. Agadoni has a Bachelor of Arts in communications from California State University-Fullerton.