often banks increase your credit limit when you pay off bills on time .Does the credit histroy get effected meaning does ur credit score drop?.
2006-11-01 06:43:37 · 10 answers · asked by Ash c 2 in Business & Finance ➔ Credit
Increasing your credit limits is one of the fastest and easiest ways to increase your FICO credit scores.
When you increase your credit limits and your spending patterns remain the same you end up using a smaller percentage of your combined credit limits. This increases your credit score rating.
Watch out for this potential pitfall though...
If you go out and use up the newly available credit you'll be back in the same situation with your FICO credit scores (and you will owe even more money). So don't make that mistake.
Think of your increased credit limit as overdraft protection on a checking account. You're not supposed to ever use it…but it's nice to have just in case.
2006-11-02 06:16:15 · answer #1 · answered by Brian H 2 · 1⤊ 0⤋
This is a two-edged sword. The credit bureau will look at it this way:
- Previously you had a $2000 limit and were using $1500 of it, this (assuming you have zero other debt) shows that you are utilizing 75% of your available credit. If your limit were to increase to a $3000 limit and you are still using the same $1500 you are now using 50% of your limit. The credit bureau will be happier to see that you are utilizing a lower percentage of your available credit.
- On the other hand, your total potential indebtedness was only $2000 before whereas now it's $3000. The credit bureau will consider that additional $1000 as a potential problem as that debt payment will now have to "compete" with whatever payment that you're making to a new lender.
Generally speaking, it's a good sign that you are receiving a higher credit limit. If nothing else the issuer that raised your limit has faith in you and feels comfortable with your credit worthiness. Chances are that this is reflected in a higher credit score.
Note: if you have a lot of these accounts (and in particular are department store or gas station cards) you should consider paying off and closing some of them out. Dept store credit lines are looked at very differently from bank-issued Visa / MC / Amex, etc.
2006-11-01 11:12:06 · answer #2 · answered by drew30319 2 · 0⤊ 0⤋
No it doesn't. If you have $500 credit limit and if you run the bill of no more than $50, your credit limit will go up to say $1K and at the same time your credit score too.
Inverse is true for the credit score. Never ever have balance close to the credit card limit even when you are paying it off by the due date.
2006-11-01 06:48:37 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Yo LO! is correct on this one.
Having a higher credit limit will help a little bit on your score, but once you get way to high of a credit limit you have problems.
Creditors get extremely nervous when they see you make $40k a year, and have $100k in available credit. That will hurt your credit score.
But as long as you have been making payments, and don't get too large of a limit, it will work out ok.
2006-11-01 10:47:55 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Your credit score would go up. The smaller precentage of your available balance that is in use, the better your credit score.
$50 used of $100 credit limit = 50% debt to credit limit
$50 used of $1000 credit limit = 5% debt to credit limit
2006-11-01 10:30:52 · answer #5 · answered by Process Guy 2 · 1⤊ 0⤋
i think only the credit companies know how they create a credit score, although from what I've heard, and increase in credit limit is probably good. this is because you're showing some level of responsibility. it's also good if you maintain your current spending level, because then the amount of debit you have versus what you're allowed is at a better ratio. however, increasing your limits by increasing the number of cards is bad. also, if you ask for a limit and are denied, this is also bad.
finally, when the stars are misaligned, Equifax and Experian and Transunion will just spontaneously generate numbers based on the zodiac
2006-11-01 06:49:59 · answer #6 · answered by Gina S 3 · 0⤊ 1⤋
On the contrary, your credit score rises. Higher limits signal your responsibility and ability to manage credit.
2006-11-01 06:45:59 · answer #7 · answered by Wanderer 4 · 0⤊ 0⤋
Your score goes up, however, too much credit can be a bad thing too.
I got rejected for a mortgage loan once because my debt to loan ratio was too high, meaning I had too much avaliable credit (A lot of cards with $0 / Very low balances).
2006-11-01 06:59:16 · answer #8 · answered by Yo LO! 6 · 0⤊ 0⤋
Your credit score depends on your punctuality with payments. Not on your limit.
2006-11-01 06:52:03 · answer #9 · answered by Anonymous · 0⤊ 1⤋
Your score should go up.
2006-11-01 06:45:33 · answer #10 · answered by Webballs 6 · 0⤊ 0⤋