Does increasing a line of credit improve credit score?

Question

If the individual had good credit and is in good standing with all credit card companies.

Answer 1

Yes and no.   When they FIRST increase it, your score will drop a few points ... maybe 5 - 10 points ... this is because that potentially makes you a bigger risk of using the credit irresponsibly.  

HOWEVER, if you keep your balances low (or better yet no balance), and use your credit wisely, your credit score will go up in 3 - 6 months because the ratio of the amount of credit you have outstanding vs. the total amount of credit available will be much smaller.  

In other words if you owe $5,000 and have $20,000 available your debt ratio is 25%.   If they increase your available credit to $50,000 and you still owe $5,000 your debt ratio drops to 10%.  The 10% looks much better on a credit score.   But ... initially there will be a SMALL drop ... not enough to worry about too much.

Answer 2

Yes, if you are financially responsible and will not use all the credit you are given, it is advisable to increase your limit every 6 months.

30% of your credit score is your debt utilization ratio. Ratio of your available credit vs. debt. Most advisors say keep the limit to 10 times your normal credit card balance or keep the balance under 10% of your limits.

Common myth: Too much credit is bad. Wrong. The more credit you have available and the less you use shows that you are financially stable and are living below your means and use credit wisely.

Maxing out your credit can lower your score at times 80 points. Its the same if you are maxed out with $20k in debt  or maxed out with your only $300 dept. store card.

That said, raising limits and/or paying off credit cards is the easiest and fastest way to change your credit score. Note, increasing your limit will normally cause an credit inquiry. This is a very small negative, but short term event that usually has a 2-10 point effect. Your benefits of a high limit will out weigh this substantially.

Answer 3

A number of these responses are correct. Bottom Line:

- Don't spend more than you have

- Keep your balances low in relation to limits

- Try not to add new credit unless you need to

Remember credit "repair" agencies are scams. Any errors you can fix on your own. You can't "fix" corrected notations.

If it's too good to be true, it is