Worth it to request credit limit increase?

[starnz]

Hello, I have a situation and I am not quite sure the best way to handle it. I have several credit cards with a total credit limit among them in the 30k range. A couple years ago I was in credit card debt and decided enough was enough, I needed to get out. So I stopped using the cards and focused on paying the outstanding balances off. Now I have successfully paid off all my credit card debt and am currently re-evaluating my credit card situation.

In the couple years after deciding not to use my cards and pay them all off I have been surprised by my credit issuers slashing or even closing limits originally granted. In the time it took me to pay off my cards, I have had two issuers close my accounts and my other credit limits were decreased dramatically all due to inactivity. So at the end of the day, after paying off all debt besides my mortgage, my credit score went down because of the closed accounts and lower limits.

I am now contacting the companies to get my original limits reinstated only to be told they can only increase them by $500 or so. Considering they have to pull my report and are only raising the limit $500 dollars, is it worth requesting the limit increase. Is the gain I get from lowering my utilization(raising the limit) more or less than the hit I take from the credit inquiry?

[littleroc02us]

Why in the heck do you care about your credit score? If I was in your situation, which I am working towards, what do you ever need to borrow money for again. The Fico score is only based on your borrowing of debt and paying it back. Stay on track buddy. You are where most people should be.

[disneysteve]

Is the gain I get from lowering my utilization(raising the limit) more or less than the hit I take from the credit inquiry?

The gain you get from higher limits is long-lasting. The hit you take from the credit inquiry is temporary and recovers over time. I'd say go for the higher limits.

Why in the heck do you care about your credit score?

As we've said many times, credits scores are important for more than just borrowing money. Many landlords check your credit before renting to you. Many employers check your credit before offering you a job (especially if the job involves handling money). Many insurance companies check your credit when determining your insurance premiums.

[wincrasher]

Steve is right, your score is important for a variety of reasons.

High limits on a few cards can really help your score, but how much is enough? No one knows for sure. I'd think a couple cards with a $5k limit on each would be plenty for most people. You may be better off just using the cards you have with your normal spending, but paying off the balance each month. Keep your spending on each below 25% of the limit each cycle. If you start using your cards, the card issuers will eventually respond to a "good" customer by raising limits and offering inducements. If you go inactive, they don't want to have you - you are costing them money.

[disneysteve]

how much is enough?
I'd think a couple cards with a $5k limit on each would be plenty for most people.
Keep your spending on each below 25% of the limit each cycle.

I think you answered your own question. Look at your typical monthly charges and the max that you have traditionally charged in any given month. Aim for a credit limit of 5 times that maximum. Personally, we charge about $3,500/month so I always want our limit to be a bare minimum of $17,500. Our limit is way higher than that, like in the range of 100K. We won't ever need it and will most likely never charge 20% of that, though I have charged over 10K in a month (did it just a couple of months ago when we booked a family cruise and I paid upfront and got reimbursed by other family members). So I want that limit to be there just in case and not worry about messing with my credit score if the need arises to charge a 5-figure amount.

[starnz]

Personally, we charge about $3,500/month so I always want our limit to be a bare minimum of $17,500. Our limit is way higher than that, like in the range of 100K.

This brings up another question I have. I've also noticed that my credit limit has been reduced on a card that I have actively used but only for relatively small purchases. The card had a limit of $5000 and I was using it regularly but never charged more than $500. They then lowered my limit to $2500 which in turn lowered my credit score.

Has anyone else experienced this or have strategies to avoid it?

Thanks

[littleroc02us]

As we've said many times, credits scores are important for more than just borrowing money. Many landlords check your credit before renting to you. Many employers check your credit before offering you a job (especially if the job involves handling money). Many insurance companies check your credit when determining your insurance premiums.

If someone owned their house and had no mortgage then renting isn't even in the deck of cards. Yes insurance can be affected and as for the job goes, when you interview you can explain to the employer that the reason you don't have a credit score is because you don't have any debt and you don't borrow money. Why would any employer have a problem with someone who is totally in charge of his life, has no debt, a paid for house and has tons of money in the bank. For the common man who loves to borrow money, has credit cards and uses them, has a mortgage and his net worth isn't much than I can see why the credit score would matter. Plus why would you want to work for a company who bases your employment on your ability to borrow money and pay it back. I would think person number one (debt free man) shows more character and responsibility in my mind.

By the way, did you know there are lawsuits all over the place because the wealthy are sick and tired of being totally debt free and not borrowing money and having their insurance affected by a credit score, since they don't have one.

[PMMM]

I was in the same boat a couple years ago. In fact I used a credit card for a purchase that was larger then the credit limit, but only because the credit card company lowered the limit without my knowledge and then they tried to charge me an over limit fee. I called them and raised some cain. I simple told them they needed to inform me that the limit was reduced and they failed to do that. I also told them to look at the transaction history of the card. They did those things and then reinstated the 5K limit and credited back the overlimit charges.

But I don't use that credit card much anymore now just because of the action of the credit card company. I have too many credit cards but because I don't want a hit to my credit score I rotate through the cards and use them at least a couple times per year just to keep them from going inactive. I have not had any of the limits reduced since that one incident.

Regards,

PMMM

I would ask to have to the limits reinstated. I agree with the conclusion that most others came too.

[tripods68]

I have 3 active credit cards now before I had somewhere around 8 active cards. In one of my cards, I originally was pre-approved for $15K limit but decided to opt to 5K limit, fearing a higher credit limit might make me wants use it all. But I know better of course. At that time, my credit score was around 700 that I know can be improved for many obvious reasons. I learned by having a utility rate 30% or below of your credit limit increases the score. The lower the utility rate, the higher your credit score becomes. I mainly use this card for car repairs and rebates purposes (below $1000 or 1000/5000= 20% utilization rate) then pay it off each month. I wanted to decrease utility rate by having a higher credit limt but keeping same spending amount. So I opted for $10K limit (1000/10,000= 10%). Today my average scores ranges from 793 to 810 between all three credit reportings.