If you pay your credit cards on time, there is a simple trick to boost your credit score.
Whether you use a digital calendar on your phone or computer or a physical notebook planner, set a calendar reminder or post a sticky note every 6 months and request a credit line increase on your credit cards.
Although some credit cards require you to call customer service for this (Chase requires a phone call), most banks will allow requests for credit line increases by simply logging into your account and searching for ‘credit line increase’. While some issuers may require a soft inquiry to your credit which may temporarily reduce your score by a handful of points, in the long run, increasing your credit line will be a boost to your credit score.
If you have intentions of applying for a loan or have another instance that requires a hard credit pull, it may be best to hold off on this strategy until the difference of a few points may be of less consequence.
Additionally, it should be cautioned that this method will only work to increase credit scores if your spending remains roughly the same as it was before the increase. Although it is tempting to want to spend more money with the additional imagined spending capability, the ‘more credit = more spending’ mentality will not help your credit score or your wallet if you take advantage of the extended credit.
The reason that increasing your credit line is good for your overall score is that your credit utilization accounts for 30% of the calculated credit score, the largest factor after payment history, accounting for 35% of the total score. As a refresher, ‘credit utilization’ is just fancy talk for the percentage of how much you owe versus the overall credit line you have across all your accounts.
For example, if you average $2,000 a month owerd across all your credit cards and you have a $10,000 credit line, your credit utilization is 20%, dividing what you owe by your total credit line.
For a healthy credit score, creditors prefer to see a credit utilization of under 30%. Beyond that, their viewpoint seems to be ‘the lower utilization rate, the better’.
Now, let’s say you manage to increase your credit line by $2,000, making it now $12,000. If your monthly spending stays at $2,000, then your new credit line utilization is 17%. Six months later let’s say your credit line is now $15,000- your new utilization rate is 13%. Now, six months later you increase again and your total credit limit is $20,000 and you’re still only spending $2,000 a month. Your utilization rate, just two years later, went down by half, from 20% to 10%.
Also, it should be known that it is not guaranteed that a credit line increase will be granted when requested, but it never hurts to ask because the worst that can happen is you will be denied and your credit line stays the same. It is best to wait at least 6 months from when you first open a new account to ask for your first credit line increase as this alone may be a reason for denial, and asking too frequently or asking on too many accounts in short succession can be a red flag to creditors.
If denied, you can also request a smaller credit line increase. I’ve noticed that Bank of America is generous with credit limit increases for my Alaska Airlines card, while increases for Chase and Capital One have been by much smaller increments, sometimes only by $1,000 at a time.
However, these numbers should not matter as there is no intent to spend this additional credit as it is all in an effort to keep boosting that credit score.
When applying for the increase you will typically be asked for your gross income, your monthly portion of rent or mortgage, and sometimes why the increase is being requested. I encourage being honest about income and housing costs, but ‘increasing credit utilization’ is not an option for application of the increase so I generally respond with the ‘I plan to spend more money soon’ response or something like it. The denial or approval is sometimes immediate, and other times you may be notified that they have ‘submitted your request’ and you may have to wait for something to arrive in the mail, usually a denial.
Having a good credit score is a helpful adulting tool that can be a key to unlocking access to things like lower mortgage rates, cheaper phone plans, and more premium credit cards. By setting regular calendar reminders every six months for each credit card, and consistently requesting increased lines of credit, this simple yet effective method can help rehabilitate any credit score and get you closer to your goals.
