Improve Your Credit Rating by Requesting an Increase in Your Credit Limit
If you want to improve your credit rating, you need to make payments on all your debts on time, have small balances on your credit cards, and wait for all that good credit to gradually increase your rating over time. Right?
Well, as the Motley Fool reminded us, there is one often overlooked step you can take if you want to quickly improve your credit rating: request an increase in your credit limit .
When you ask your existing lenders to increase your line of credit, you are simply asking them to increase your credit limit and provide you with more credit.
This can have a positive effect on your credit utilization rate, which is one of the most important components of your credit rating. Credit utilization is second only to payment history and accounts for 30% of your Fair Isaac Corporation FICO® Score.
As Christie Bieber of Motley Fool explains, many people don’t realize they can contact credit card companies and ask for a credit limit increase. (Many banks even allow you to make a request online, so you don’t have to wait while waiting for customer service.) This type of request does not usually require a hard return on your credit, which means it will likely win. It won’t hurt your credit rating – and if an increase in your credit limit is granted, you can expect a sharp jump in your credit rating to follow.
Of course, this increase in points goes away if you turn the increase in credit into new debt, so don’t waste any extra credit. Instead, use it to keep your loan utilization rate as low as possible and your credit rating as high as possible.
You can then return to your normal routine of on-time payments and small balance and continue to expand your credit history until you finally reach your ideal credit rating.