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 increase 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.
However, 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 hack until another time when the difference of a few points might matter less.
Additionally, it should be cautioned that this method will only work if you keep your spending roughly the same as it was before the increase. It is tempting to want to spend more with the additional imagined spending ability, but the ‘more credit = more spending’ will not help your credit score or your wallet.
The reason that increasing your credit line is good for your overall score is that your credit utilization accounts for 30% of the calculated score, the largest factor after payment history which accounts for 35%. 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 across all your credit cards and you have a $10,000 credit line, your credit utilization is 20% after dividing what you owe by what your total credit line is.
For a healthy credit score, creditors prefer a credit utilization of under 30%, but the lower the utilization, the better.
Now, let’s say you manage to increase your credit line by $2000 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, with that ever-boosting score 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%.
It is not guaranteed that a credit line increase will be granted, but it never hurts to ask because the worst that can happen is you will be denied and your credit score 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.
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 $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 so I generally respond with ‘I plan to spend more soon’ response or something like it. Sometimes the denial or approval is immediate, while other times it might be a ‘we’ve submitted your request’ and you will wait for something in the mail.
Make an effort to spread out credit limit increase requests as asking for too much credit at once can be a red flag to creditors. Thus, setting regular calendar reminders for every six months for different credit cards is a great method to always be working towards a great credit score.
