Recently, my credit card company increased my credit limit without asking. I was OK with it, but it got me thinking: Is a credit limit increase always a good thing? While it can certainly be beneficial, particularly when it comes to your credit score, there are some instances when you may want to think twice before you accept a credit limit increase.
Apply for a new card. Even if the limit on the new card isn't higher than the current one, it still increases your overall available credit. Credit utilization, or the amount of your available credit that's in use, is a major factor in your credit scores.
Low utilization is a sign that you're living well within your means, while high utilization suggests the opposite. If you're spending most or all of your available credit every month — even if you pay off your balances — that can damage your scores. Even if you're sure you can get a higher credit limit, evaluate your reasons for wanting it. But if you need more credit because you're in a consistent state of financial emergency, a higher limit is unlikely to solve your problem and could even make it worse.
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Point out that you have a high FICO score or are a longtime cardholder. Card issuers understand that there are a lot of other companies out there; as long as you are a good borrower, they want to keep you with them and not lose your business to someone else. Increasing your credit limit can have its advantages. The biggest one is that it can help reduce your credit utilization ratio as long as your spending stays the same , which will help boost your credit score.
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