For Chase com increasemyline before and today's topic is going to be about credit limit increases, how to get a credit limit increase. I'm going to make it very fast very easy, and the pros the cons, why somebody may want one and why you should not want one. Let's get right into it.
What is a credit limit increase
What is a credit limit increase? A credit limit increase is when a customer or consumer, let's put this in you as a customer, you want to get an increase in the amount of money that you can use that a credit card company will give to you. We are talking solely about credit card limit increases.
For example, you have a Chase freedom card, which is one of my favorite cards, five percent cash back rotating categories, we're going to be talking about it soon, but let's get back to the topic.
You have the Chase Freedom card and you have in $1,000 credit limit, and you want to now get to $5,000 credit limit or $10,000 credit limit, etc, that's what it increases.
Couple of different ways to increase the limit
There's a couple of different ways that you can get one, but that is what a credit limit increase is. The first way you can get, you can always ask your credit card company for a credit limit increase. Now you do need to be careful and you do need to make sure you were speaking to somebody before you do.
Most of the time they'll tell you if it is a hard inquiry on your credit, which means they're actually going to pull information from your credit report, and it's going to have some type of effect on your credit score, maybe a few points here or there to see if you have the chance to get a credit limit increase.
Soft inquiry for a limit increase
I believe and I can be wrong, but I believe Chase doesn't a hard inquiry, but a place like American Express I know for a fact because I just did it. I had $8,000 limit and I just never really cared, because I don't really use the card much, and I just put on the website that I wanted twenty thousand, and they gave me $15,700.
That's my credit limit increase, it was no hard inquiry, was a soft inquiry, and it took effect within about 5 minutes. I'm not going to go and use $15,700, but here's the reason why I did it and I'll tell you about that later.
The company do the increase itself
The second way you can get it pretty much not doing anything, most companies do they see that you are responsible with your payments, you're using a card often, they're going to just go ahead and increase you. Sometimes they do it without your permission, sometimes they just tell you, sometimes they ask if you want to get an increase.
Those are the two ways that you can get one. You can have an ask, you can either just do your normal spending, maybe updating your income often, like an American Express you update your income, in Chase you can update your income.
Why would somebody want to get the limit increased
Those are the two ways you can do so for updating your credit limit. Now, why would somebody want to get it? In my situation, if I don't even use the card much why would I want to get an increase from about $8,000 to $15,000? Here's why your credit utilization lowers.
When they look at your credit utilization, it is a total of all of your balances, what that means? It is pretty much a debt, how much you use on your credit cards versus the amount that you have.
Let's say I have a $1,000 credit limit total for all my cards, versus somebody who has ten thousand dollars on all their cards. We both spend $300, my percentage for my credit utilization is 30% because I only have $1,000 to my disposal.
But that other person if they have $10,000 and they spend the same amount of money, three percent utilization, which is a lot better in the eyes of the lender because they're not looked at as much as a risk.
The reason people do the limit increase
They have things, they have a lot more money, it's in our disposal, but they don't use it, the percentage is a lot lower and it's %27 lower, so that's why somebody we really wanted, that's the only reason I do it, and I only do it if it's a soft inquiry. If it is a hard inquiry, I do not use it.
Now other people may want to do it, people who are trying to get signup bonuses, and things like that. Sometimes you'll have a card where you have to spend $4,000 in the first 3 months, it's going to be hard to do so, and you're going to be cutting it close if you only got $1,000 limit.
Some of the signup bonuses you may have to try to catch up on or you may want to make big purchases and get points, so maybe you want to go on a vacation, say a cruise or Christmas times coming up you want to make a big purchase, and get points and things of that nature. It's going to be hard to do so in a smaller line for your credit card and your credit card limit. That's the reason people do it now.
The reason people should not do the limit increase
The reason people should not do it, you don't want to go out there and just splurge on things, just because you don't want to just go out there and just buy things you don't need. That is one thing you want to stay away from.
We're trying to teach you to get out of debt and not go more into it, you also may want to have it, and this is a good observation. People don't maybe think about this life happens, people get sick, people lose jobs, and credit card companies do not want to lend to you when you need it.
If you're out of a job now, you have no income at that point, it's kind of too late, so you want to kind of have these things already and play. If you've got $20,000 or $40,000 or $50,000 that you buy in, no way shape or form, make sure that it is like your last resort, you don't ever want to be in credit card debt.
Another reason why somebody wants to increase
But if you need to put some things on your card for emergencies, you have that to your disposal, so you want to kind of make sure you are set, and you're making sure you have like some type of safety net. That's another reason why somebody would want to do so.
In a positive perspective again credit limit increases are awesome, again utilization emergencies at the last last last resort, and also if you want to make big purchases and get points and meet sign up bonus requirements, etc.