Working the Debt Amount Owed
The second most important percentage FICO uses to assess your creditworthiness and thus determine your credit score is “amount owed.” The more you owe, without a savings account to pay it all off—the lower your credit score is going to be. It is a debt to income ratio concept. You can have a very high credit limit on numerous open accounts, but when you start to owe closer to all of those credit limits, your scores decrease.
If you have a situation where you are edging closer to the credit limit or the perfect credit utilization ratio, then you will want to see about getting a credit limit increase. Some credit card companies will notice you are getting closer to the limit and assess your credit history.
For individuals that are not in arrears, it is possible for you to get an increased credit limit, automatically. The company will just increase the limit without asking you.
Some credit accounts will increase your limit if you ask. It will depend on your standing with the company.
How it Works
- Call the company.
- Ask that they review your credit card account.
- State that you make on-time payments and you simply want to improve your credit scores.
- If you can, state that you are willing to make an increased payment right then and there on the phone as a promise that you are paying the card down.
- You may need to speak with an account manager with higher permissions than the individual that first answers. If you do need this approval, ask for it. Don’t take no for an answer from the customer service representative that answers the phone. There is nothing wrong with asking to speak with a supervisor to get what you want, as long as you make it clear that the person who answered was very helpful, they just didn’t have the same permissions.
As with any of the strategies throughout this website you need to understand that your score is not going to increase two seconds after you gain the credit limit increase. It is a tool to help you get better scores in the next few months. When FICO reassesses your credit scores, then you will see a change in your score from all the changes you are making to build a better credit history.
- Increasing your credit limit is not so you spend more on your credit cards.
- The increase in your limit is designed to increase your score because you have a higher limit than the debt amount owed.
- If you spend more because you have a higher limit, then nothing is going to change.
- It will also require time for your scores to increase.
- The increase is not going to be hundreds of points, but a steady increase.
- Use this strategy as you gain independent accounts from family too. If you have credit being built on old family accounts, then you can switch to your own account and ask for an increase in your credit limit.
The more strategies you utilize to make your credit look better, the more your score will increase over time. You may only gain 5 points with a credit limit increase, but at least this is five more points to your credit score than before.