Why I’ve Never Asked For A Credit Limit Increase

so i've never asked for a credit limit increase and to some people that might sound surprising considering that i have a credit score that sits around 770 to 780 and total credit limits around 65 000 that's why in this video i wanted to talk about credit limit increases and why i just haven't found them to be necessary for me even though there really can be some nice benefits to having higher limits on your credit cards so first i'm going to go over a few of those benefits then i'll talk about why i personally have never asked for an increase to my limits and then finally i'll give you a few credit limit increase tips in case you do still want that but i'll also give you five quick credit card recommendations if you just want to open a new credit card instead so i'll explain what i mean by all that and as always we're gonna jump right into the content so make sure to go ahead and tap a like button and subscribe down below to help support the channel but let's get started by going over three main benefits of getting a higher credit limit now first an increased limit typically has a direct impact on your credit score by helping to lower your credit utilization which is one of the highest impact factors to your credit score since it accounts for about 30 of that score basically since your credit utilization on any individual card is calculated as your balance divided by your credit limit if your spending that goes towards your balance remains mostly the same then an increased limit in the denominator of that equation is going to lower that utilization percentage and ideally since we want to aim to keep credit utilization below 10 when we increase our credit limit to lower our utilization that sometimes can make a huge difference in getting that number below that target percentage then a second major benefit of increasing your credit limit is that a higher limit is just going to give you more spending power for certain purchases so a good example from my own life right now is that i'm probably gonna buy a new mattress and a bed frame soon and i was just shopping around at a store so the set that i want is going to cost around 2500 now if i only had a beginner credit card that still had a 500 credit limit then i'm not going to have enough spending power on that card to buy that mattress set but if i asked for and got approved for a credit limit increase to maybe around six thousand dollars like i have on the card that i plan to use for this then i'll have no problem making that 2500 purchase and finally a third benefit that a lot of people feel like a higher credit limit is going to give them is more room for spending in case of an emergency now i don't think it's a good idea for people to rely entirely on their credit card as their emergency fund so i always recommend that everyone try to build up at least three to six months worth of cash instead but in a worst-case scenario where there's no other place to turn to for money in an emergency then i understand that having a higher limit on a credit card might give people options again though that cash emergency fund is way better and honestly it should be a priority for you to have in place before you even start using a credit card so i just want to make that clear now okay so all those sound like good reasons to ask for a credit limit increase so next let's go over why i just haven't ever asked for one and what i've done over the past seven years of using credit cards instead so the first thing that i think about when it comes to asking for a credit limit increase is will asking for this increase trigger a hard inquiry now hard inquiry is simply when a credit card issuer is going to pull my credit report to take a look at it if i'm requesting some type of new credit and hard inquiries typically drop your credit score by a few points in the short term when they occur even though their effect wears off over a few months before falling off your report in about two years so heart inquiries aren't all that bad and they're nothing to be afraid of if you don't apply for credit too often but they are a small cost to pay if you're asking for a credit limit increase or opening a new credit card which is also going to result in a hard inquiry now the difference in a hard pull like that from a limit increase request versus a new card application is that a new credit card will also get me a new account on my report plus a signup bonus better points or cashback categories and some other benefits too so for me if i'm thinking about that small cost of taking on a new hard inquiry to drop my credit score a bit in the short term i know that i'm gonna get a lot more value out of opening a new credit card with a new limit compared to just asking for a limit increase on an existing card now there's a few things to consider with all that we just went over so first you might not be like me when thinking about asking for a credit limit increase versus opening a new credit card because maybe you just don't want another credit card you might be fine just having one or two or three cards that you can stick with and use and that's totally fair because most people don't need to have as many credit cards as i do also depending on the issuer they might actually only do a soft inquiry as opposed to a hard inquiry for a credit limit increase request and soft inquiries are not going to affect your credit score so in those cases asking for an increase to your existing limit really doesn't have any negatives on the surface but of course that's also assuming that you're going to be using this new higher limit responsibly and not just seeing it as an excuse to start spending more now for each credit card issuer and whether they're gonna do a hard inquiry or a soft inquiry for that credit limit increase request there's just too many specifics for me to say with certainty what's gonna happen for everyone watching this but a couple of examples from what i've read and i know is that chase typically does a hard inquiry for credit limit increases while an issuer like capital one is only going to do a soft inquiry and the fact that chase specifically does this is another reason why i've actually never requested a credit limit increase because aside from a couple of charge cards that i have with another issuer my chase credit cards are some of my most used right now since i have seven of my 11 active credit cards with them so you'll definitely want to do your own research or just call your issuer and ask whether or not a credit limit increase request is going to result in a hard inquiry that affects your credit score now another reason for me never asking for a credit limit increase is because of all my credit cards right now the limits that i have are at least a couple thousand dollars at a minimum so spending power has honestly never been a concern of mine if i had to make a larger purchase and again i also have a couple of charge cards with no preset limit which is nice to have as well but also i've been very strict with saving for and then maintaining a cash emergency fund of at least three to six months worth of expenses so i don't need any higher credit limits for that and when it comes to credit utilization i have a few tips that i'm going to get to here in just a minute that have helped me to always keep that utilization below 10 on all my cards no matter what so again a higher limit doesn't really do that much for me now that means that the only logical thing in my situation has pretty much been to just apply for a new credit card instead of requesting a credit limit increase on an existing one but i'll be honest opening a new card at this point for me is also more about the points and benefits and not so much the additional credit limit all right so that's what i do but of course everyone's going to be different and like i said some people might not want to actually open a new credit card plus again depending on the issuer there might not be a hard inquiry if you request an increased limit or sometimes they might just automatically increase your limit without you even asking so next here let's talk about some credit limit increase tips if you still think an increased limit is right for you and then i'll go over a few other credit card recommendations that i would go for personally if i wanted a new card with a new limit that would give me some other nice benefits as well okay so tip number one is going to be to always keep your income updated with whatever accounts you have with different credit card issuers now always make sure to tell the truth and don't lie because they don't always confirm or verify what your income is but if you make up some crazy income number then that could land you in some trouble and get your account shut down so don't lie but keeping that income number accurate might allow the issuer to just give you an automatic credit limit increase without you even asking since all they want to do is make sure that you have the means to pay back anything that you do borrow from them then tip number two like i mentioned before if you really want a higher credit limit on a card then you can request it but just see if they're gonna do a hard inquiry or a soft inquiry hard inquiry is the one where it drops your credit score by a few points in the short term but again that might not be a big deal if you're not planning to apply for any other type of credit or loan in the near future and tip number 2.5 here is that if you want that higher credit limit just to keep your credit utilization low like i showed you with that equation you should know that you don't always need to have a higher credit limit to do that so with this tip if my balance is unusually high for some reason so let's go back to that mattress example like i had before for a second if i bought a mattress that cost twenty five hundred dollars on a card that has a six thousand dollar limit that's still a forty one point six seven percent credit utilization which is too high so what i do instead of asking for a credit limit increase is i just prepay that 2500 balance before my credit card statement closes that way a lower utilization gets reported now i've explained this in some more details and some other videos that i'll link to down below but basically your credit utilization can be thought of as a snapshot at a moment in time when it's reported to the credit bureaus and affects your credit score in a good or bad way and that snapshot is usually taken about once per month right on or around the statement closing date which you can find in your account but just do some research to confirm when exactly your issuer is going to report that info so if i know that my statement for this credit card closes on august 30th and today is only august 22nd i can just prepay either the entire 2500 amount so that my balance is zero dollars and a utilization of zero percent is reported on august 30th and that's okay but it also looks like i never even used any of my credit in the first place or i can prepay maybe 2 400 of that 2500 balance so that i only have a statement balance of 100 that's reported on my statement closing date of august 30th and then my credit utilization gets reported as being 1.67 which looks much better now this goes along with tip number three which is to only use your credit card if you already have cash set aside to pay off your balance in full immediately if you want to some people like to rely on future expected income from maybe their next paycheck to pay off last month's credit card statement but honestly that's just too risky and not a smart habit to get into so like i always talk about you should have some sort of a budget and then work to cut costs where you can to save up three to six months worth of expenses but also leave a little bit of extra cash on the side for paying your bills as well and that helps to create a nice little cushion for you to stay out of credit card debt now also remember to always treat your credit card like cash or a debit card by paying off your statement balances on time and in full each and every month because that's such an important thing to do to avoid expensive high interest charges then tip number four if you decide that a credit limit increase is going to be right for you then make sure you're requesting it for a credit card that you actually do use if you try to ask for an increase on a card that you haven't even touched in six months well the chances are the issuer won't really see the need to raise your limit but if you have maybe a two thousand dollar limit and you're consistently using it and spending up to that balance that's right around that limit before paying it down and that's gonna tell them hey this person is using this card they're paying us back on time with no trouble and they can handle a higher limit and going off that for tip number five if you need to contact that issuer's customer service number to request that credit limit increase then make sure you get some notes prepared ahead of time about your good habits with your credit card i mean you can remind them how long you've been a customer with them how you've never missed a payment and if you have missed a payment then why that was just a simple mistake and it won't happen again now having a good credit score will obviously help with all this stuff as well so make sure to go ahead and subscribe down below and check out my channel for some other tips on increasing that credit score now if you're more like me and you just rather open up a new credit card with a new limit and a sign up bonus and some other benefits too and here's a quick rundown of five no annual fee cards that i think can be a great fit for just about anyone first there's the city custom cash which can get you a 200 bonus plus five percent back in your high spend category in one of ten categories each billing cycle that makes this the perfect card to use as a dedicated card for things like gas groceries or dining because you can effectively lock in getting five percent back in any one of those categories by using the custom cash card just like that then second there's the chase freedom flex which also comes with a 200 bonus and with the freedom flex you can also earn five percent back in quarterly rotating categories which so far this year have included things like grocery stores amazon and gas stations as well you can also get five percent back on travel book through chase three percent back on dining and three percent back at drugstores which adds a lot of value then finally i like to recommend cards that can be used as good catch-all options where they earn a flat rate of around 1.5 to 2 back on everything so for those cards i really like the chase freedom unlimited and the capital one quicksilver at 1.5 back on all purchases as well as the city double cash and the sofi credit card at two percent back on all purchases most of those cards are gonna come with solid welcome notices as well but always make sure you do some research first so i'm gonna leave some links down below where you can help to support the channel and learn more about some of these credit cards and some other great ones out there as well now if you want to avoid getting denied when you actually go to apply for any new card then you'll want to check out this video over here next because that's going to go over a few simple steps you can take to get approved for any credit card so as always thank you so much for watching and i'll see you in the next one

Channel: Daniel Braun

Views: 45,278

Keywords: credit, credit card, credit cards, credit limit, credit limit increase, credit limit increases, credit limit increase tips, increase credit limit, how to increase credit limit, how to increase your credit card limit, how to get huge credit limit increases, credit card limit, how to raise credit limit, increase credit limit in 2022, increase credit limit 2022, credit limit increase 2022, credit increase, how to increase your credit limit, daniel braun

Id: nAjUuNMoF1o

Length: 11min 41sec (701 seconds)

Published: Wed Aug 24 2022