Your credit score is one of the most important things creditors look for, right after employment and income. It shows them how creditworthy you are and what interest to charge you. Since your credit score is so important, how do you boost it easily without too much hassle?
In this article, we’ll go over one move that you may or may not know but will almost always work in your favor.
How to boost your credit score
Requesting a credit line increase is one of the easiest ways you can boost your credit score without doing much else. Some of you right now you’re thinking “I already knew this” but have you tried it out yourself?
Most creditors increase your limits periodically based on your credit usage and credit history, but you can always request an increase by yourself. By being proactive, you can expect to see more credit increases than waiting for one to happen.
How does a credit increase help my credit?
When credit bureaus calculate your credit score, they look at several factors.
- Payment History: Are all your bills paid on time every month?
- Credit Utilization: How much do you owe your creditors relative to your total credit limit?
- Age of Credit: How long have you had your credit cards and loans open?
- Credit Inquiries: How many new accounts are you opening and have you been applying for new cards?
- Credit Mix: Are you able to responsibly juggle different types of accounts (credit cards, mortgage, auto loan)?
When you increase your credit limit, you improve your Credit Utilization Ratio. This accounts for about 30% of your credit score. For example, if you had a $1,000 limit, and you spend $500, your utilization will be 50%.
Your Credit Utilization should remain under 30% before it hurts your credit score. Using the example above, if you increase your limit from $1,000 to $2,500, then your utilization will drop to 20%, improving your credit score!
Does requesting a credit increase hurt my credit?
This depends. Some creditors actually don’t perform a hard inquiry when you request a credit increase. At the time of writing this, Synchrony Bank, PayPal, and Amazon do not perform hard inquiries when you request a credit increase! In those cases, the best-case scenario is that they approve your request, and the worst case is that they will deny it, without affecting your credit score.
How do I request a credit increase?
Depending on your creditor, you can either do this online or over the phone. You just tell them that you are wanting a credit limit increase on your credit card.
Getting an approval or denial may either be instant or may take a few days. This will depend on your own credit situation and relationship with your bank.
If you want to boost your credit score without too much effort, requesting a credit limit increase is a great way to do it. Make sure you do this periodically, especially whenever your financial situation changes for the better. If you get a salary increase, pay off a loan, etc, see if you can get a credit limit increase.
Also, try to space it out as well. If you request credit limit increases too often, that might also be a red flag to your bank and creditors. It’s a balancing act, but will also be beneficial and rewarding in the long run.