5 Benefits of Raising your Credit Limit
There are many benefits of raising your credit limit, here are the top 5.
More Spending Power
This one is pretty simple. The more credit you have available to you, the more you will be able to purchase before you are required to make a payment. While some may see this as a danger for getting deeper into debt- many rely on credit for their daily expenses.
Less New Lines of Credit
Before opening up a new line of credit, consider this: The age of you lines of credit is a factor in your credit score. If a credit check reveals that you have a brand new line of credit you just opened, that will negatively affect your credit score. The reporting bureaus like to see long established lines of credit that you have a history of keeping under control. So before you open up a new line of credit if you need to increase your purchasing power, consider requesting an increase for an existing line of credit.
Lower Credit Utilization Ratio
This is the key to all the other benefits. One of the core ingredients in your credit score is your credit utilization ratio. If you have $10,000 total of available credit- and you spend $5,000, until you pay off that$5,000, your credit utilization ratio is 50%. Staying under 30% is recommended by credit experts if you want to minimize the impact on your credit score.
Better Loan Terms
Along with a lower credit utilization ration and therefore better credit score, come better loan terms. The higher your credit score is, the better loan terms you will get from banks. Need a mortgage? Your credit score will be a factor in the what interest rate you receive.
Flexibility for Emergencies
Outside of credit score related benefits, a higher credit limit will allow to pay for huge or unexpected expenses. Maybe you have car or health trouble that is not covered by insurance- you’ll be happy that you have some spare credit to use if you do not have cash on hand to cover the expense.