Increasing Credit Line - Affects Credit Rating?
How does increasing credit lines on my credit cards affect my credit rating? * Assuming of course I pay all the balances off clean each month. I should rephrase to, "how does having higher AVAILABLE credit affect my credit?"
Public Comments
- Your credit rating is based on how well you pay your bills. If your credit line is increased, it's showing more debt. It could matter if/when you search for a mortgage, because the loan officer will be comparing your debt to your income ratio to determine how much mortgage you can comfortably afford.
- Increasing a credit line is likely to improve your score, all else staying the same. One of the main factors in your score is the ratio of balances to credit lines. The lower that ratio is, the higher your score will be. You can lower the ratio by either decreasing the balance or increasing the credit limit. However, if you immediately start using the new available credit, and the % of your credit line that is used remains the same (i.e. higher balances, as well as a higher credit line), it is likely your score will not improve. So, as long as you don't use the extra credit that is available, it's good for your credit score. As far as having 'too much available credit' to qualify for a mortgage - don't worry about it. I have nearly twice my annual salary in available credit and have never had a problem qualifying for a mortgage. The key is, I pay my balances off each month and I rarely use more than 2% of the available credit on a monthly basis. If there is a problem with having too much available credit, the mortgage lender will ask you to close an account. Don't do it until they ask you to, though.
- I've heard that one part of yoru credit rating is your debt to credit ratio. So, if you have $25,000 worth of credit, and you only owe $2000, then you're much better off than if you only had $5000 worth of credit, but you owed $4500. If what I heard is right, then your credit will actually get better if you increase your credit line, but don't use the extra credit. And, try to pay down what you do owe.
