A couple posts ago, I boasted about my above average credit score of 751.
Well, it’s time to gloat again. I just added 12 points to that credit score. Boom. Just like that. All it took was a 10 minute phone call.
What wizardry did I use to get a large boost in score? I asked for a huge credit line increase.
How I did it
I opened a credit card sometime in college. They started me at a $800 credit limit. Over the years, I regularly requested credit line increases (you should do the same). I would get automatic increases of less than a $1,000. I was happy to be approved so easily and quickly.
Well now I’m about to start my first full-time job with a full-time salary. This is a huge change in my life and spending. I know it and the credit card companies know it.
I called my credit card issuer a couple days ago and told them I wanted to request a credit line increase. I opted for this route vs. the typical online route because I wanted to explain my situation.
They asked me income questions and then finally how much I wanted to request. I asked questions like, “Can you just give me the maximum you’re allowed?” and “What do you think is a good number?”. I realized that the representative can’t really help with that. You’re supposed to just ask for some arbitrary amount and their people will evaluate your request.
Luckily, I’ve looked at so many personal finance websites to know that $15,000 was a pretty standard beginning credit limit.
My credit limit at the time was $2,800. I asked for $15,000. I even laughed and nervously asked the person on the other end, “Do you think that’s too much?” He couldn’t respond to that either.
He responded, “Great news! You’ve been automatically approved for a credit line of $3,600.” But that wouldn’t cut it. I asked him to put my request through anyway (by the way, this will result in a hard pull on your credit).
He submitted the request, and 10 minutes later I received a phone call confirming that I was approved for my credit line of $15,000. Happy days! I suddenly felt empowered.
An important note: just because I increased my credit line to $15,000 does not mean I should change my spending habits in any sort of way. I will continue to probably put less than $1,000 on it a month. But this does wonders for my credit score.
What are the real effects of increasing my credit limit by over 500%?
I used Credit Karma as a proxy. I noted in that same post that Credit Karma was pretty darn close to my actual score (Credit Karma estimated 753 vs. the actual 751). Well Credit Karma also has this really cool Credit Simulator tool. Check it out, it’s under My Credit –> Credit Simulator.
I had never used it before so I’m sort of discovering it for the first time. It already knows all about your credit card accounts (like the limits, how many late payments you’ve had, etc.). This tool let’s you see how certain actions impact your score. It shows what happens if you make too many credit inquiries (like if you’ve applied to several cards), if you close your oldest credit card account, and much much more.
I simulated the credit line increase and found that it increased my credit score by 12 points!
What’s the takeaway?
If you too have recently gone from student to full-time employee, use this transition to up your credit line. If you get a big raise, you can use that too to up your credit line. Credit card companies mostly care about your income. If you’ve been with them a while and have been on-time with payments, that will help too.
Note that I had been using the same credit card for a couple years while in school. When they evaluated my very large increase, I’m sure my on-time payment history helped them approve me.
Lastly, don’t be afraid to ask for a really large increase. Going from $2,800 to $15,000 seemed crazy to me, but it’s not. That’s pretty standard for a credit card. In fact, maybe I should have asked for more!
If you’re just starting out with your credit, know that you have some leverage. If you work full-time, just opened your first credit card, and received a pretty low limit, use it for a year with that low limit. Then after that year, call them up and ask them to increase it significantly (maybe $15,000 or more). Your income and year’s worth of on-time payments should be enough for them to give the okay. This is a total guess from me, but it seems reasonable to me. In fact, maybe it’ll work after just 6 months.
If you recently started earning much more money and have a pretty low credit limit, go request a much larger one!