Credit Limit Increases: A Credit Score Quick Fix or Just More Debt
If you have a credit card, even if the credit limit is low, you are on your way to major creditworthiness. It is often possible to increase the credit limit on your credit card without opening a whole new account and getting a new card. Making at least the minimum payment toward your credit card each month raises your credit score, even if you continue to carry a balance. The credit reporting bureaus know that most people cannot afford to pay their credit card balances down to zero every month. After a few months of keeping up with payments, you can request a credit limit increase. In some cases, credit card companies apply the credit limit increase without you even asking, as a reward for making your payments on time. Credit card limit increases can be an easy way to increase your borrowing and spending power, but as with anything involving debt, you should proceed with caution. To find out more about credit limit increases and other ways to raise your credit score, contact a Plantation credit repair lawyer.
How a Credit Limit Increase Can Raise Your Score
One of the factors in your credit score is the ratio of your available credit from all sources compared to the amount you owe on all your debts. Therefore, the simple process of requesting and receiving an increase on your credit limit can boost your credit to debt ratio. If your credit limit on your card is $1,000 and you have a balance of $800, your available credit is only 25% of your debt. If the credit card company agrees to increase your credit limit to $1,200, your available credit instantly becomes 50% of your debt amount. It is a lot easier to make a phone call to your credit card company than it is to find $200 in your budget to pay down your debt by that amount.
Credit limit increases may or may not involve a credit check. Sometimes the credit card company will just ask about your income and housing expenses and automatically approve the increase. The credit card company might do a credit check. This may slightly lower your credit score, but if you continue to make credit card payments on time, your credit score will quickly go back up.
How a Credit Limit Increase Can Lower Your Score
There are two ways in which requesting a credit limit increase than backfire. First, if the credit card company denies your request for the increase, then you get the credit check’s effect on your credit score but not the increased credit to debt ratio. You should not request a credit limit increase if you recently opened the account or recently missed a payment, because the credit card company probably will not approve the increase. Second, if you get the credit limit increase but then max it out with no way to pay it off, your debt problems will be worse than they were before.
Work With a Debt Lawyer About Credit Limit Increases
A South Florida debt lawyer can help you find the fastest and most practical ways to increase your credit score. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.