Credit card limit

[Mcsherbondy]

I have one credit card with a $10,000 limit. There are times, especially around the holidays, when the balance can reach seven or eight thousand dollars.the high balance relative to our credit limit seems to lower my credit score. Should I increase the credit limit on the credit card?

[Carl]

Increasing your limit won't change a thing. When you have a higher DTI ratio, your score goes down.

[lwdupont]

Yes, it would help a bit (as long as you don't fill up that extra limit 🙂 ). A coworker just yesterday said that he called up his credit card company and asked for a higher limit, and it caused his credit score to increase by 20 points. 

  Lucien

[Captjak69]

I was told not to spend more than I can pay off each month and to leave a balance of a dollar and my score would go up.

[loupokami]

Unless you plan on paying that card off at the end of the month, there's no way to get around this. You're using 70-80% of your total credit limit if you just have this one credit card. You're going to take a hit. The ideal situation is to use only 10-15% never more than 20% of your total credit, meaning you would need to increase your total credit limit to around $50,000 to stay within that sweet spot. 

I don't know how long it takes you to pay back the 7-8k you spend, I'm guessing since this is an annual thing, you're paying it off before the holidays next year, it couldn't hurt to apply for a higher credit limit card that has 0% interest for a couple years and a low to 0 transfer fee (credit unions usually offer these). This will give you some room to breathe while giving you time to pay off the loan interest free. And after you're done paying this off, I'd recommend never putting that much money on a credit card unless you absolutely need to. Even the best rates for credit cards are around 14% interest, which will cost you more paying it off than it would if you just opened a holiday account and put money in it all year (if you're paying the credit card back before the end of the year anyways, then there is absolutely no reason to ever use a credit card like this). If you're letting that 7-8k balance sit on that card longer than a month, that interest is going to add up significantly. 

I should edit this to say if you have a moneyback rewards card and charge this much to it and pay it back in the next statement, you could actually save money. If you have $8k sitting in the bank, then I'd say go for it. But like I typed above, if all you have is that card, or you have multiple cards, your total credit line should be about $50k to stay in the sweetspot if you don't want to take a ding. The good thing is, it doesn't take very long for your score to recover if you happen to use that much credit and then pay it off quickly. If you are applying for a big loan and want the best rates, I definitely wouldn't be using that much credit during this time. 

[alntoy2]

If your SOLE FOCUS is to reduce your utilization rates, yes.
If you are not concerned about the new inquiry (consumer request IS a new inquiry & remains for two years) then yes.

[lemonadrienne]

Obviously having a higher balance would affect the debt ratio, because you would have a greater ratio of used to unused credit. That's why it is recommended to have a higher limit, so you are using less of the overall available credit!

[ajyoung2012]

It CAN help. A significant piece of the credit score puzzle is based on credit allocation which is basically what percentage of the total credit offered to you you’re using. If you increase the card limit from 10k to 20k, the credit allocation would basically be cut in half because 8k is 40% of 20k and 80% of 10k. I don’t know the exact number but I believe credit allocation greater than 30% can significantly affect your credit score. Raising your limit present some obvious risks though because, if you’re not disciplined, you may end up spending more than you would have because the extra credit exists. That just means more time paying it down and more interest paid.

[JBJ]

Totally agree with the latter half of this thread. 

If the company's game (and they assuredly will be because, well, credit card companies!), raise the limit. Of course, you know, please don't go crazy (you assuredly won't!). 

Oh, and while you're on the phone with them, why not ask for a lower interest rate too? Seriously, it never hurts to ask, and if you've got a good payment history with them, they're surprisingly amenable to such suggestions. The worst thing they tell you is no, and if they do, it'll be a good thing to remember when you pay down the balance on the card and begin to think you can probably open a better card! 

Anyways, good luck... let us know how it goes!

[mdbice01]

Yes that will lower your percentage of you if you go over 30 percent on one card it will greatly impact your score till you pay it down. Try spreading you spending around the holidays to 2 or 3 card so it keeps you under the 30 % mark

[jwright]

no you shouldn't increase the card limit. the reason your credit score drops is that your balance on your card or cards just went up past the 10% card usage according to the credit bureau.   that's a lot to spend during the holiday times. if you keep your cc down under the 10% that's great. hope this helps    

[AnonFire]

Consider paying the balance before the statement closing date instead of when the payment is due. This will show a lower reported balance to the bureaus each month.

[NCperson]

Maybe cutting back on the spending habits is a strategy ????

[dc01876]

Assuming your can manage your credit responsibly with a higher credit limit then, all else equal, having a higher limit should improve your credit score at the margin.

[dc01876]

Not exactly correct.

If you increase your limit but do increase your spending/credit utilization, then it should have at least a small positive impact on your credit score as your credit utilization ratio (credit used as a percentage of total credit available) is one input taken into account when computing a FICO score. 

With respect to debt-to-income, simply just increasing your credit limit will not change your DTI. The D in the DTI ratio is based on actual debt you have outstanding, not unused credit. Of course if you increase your limit by $10k and then go out and spend the additional $10k in capacity on your credit credit then it will pressure your DTI higher, but simply increasing your limit will not impact DTI.