Finding answers about credit card limits
Everyone wants to improve his or her credit score. Maintaining good credit is crucial to keeping your finances in order. Many people even think increasing their debt and their credit card limit will improve their score if they eventually pay that debt off. But how true is that strategy?
How your credit card debt affects your score
First, it’s important to understand what effect your credit card debt will have on your score. For starters, no matter what your debt is, you always want to stay at 50% below your limit. Approaching your limit indicates that you are coming dangerously close to maxing out your credit cards. This could negatively affect your score. Secondly, it’s crucial that you not close any account with an outstanding debt. Closing a credit card will not only not get you out of debt, but will also hurt your credit score and prevent you from getting the loans you will need in the future.
Video: Debt Consolidation Tips
For credit card payments, timeliness is everything
One of the most important factors is to make your payments on time. Even the slightest late payment will hurt your credit score and make you pay fees. But the longer you go without paying, the worse things get. Once you are 30 days late, your credit card account gets marked as “delinquent.” Your interest rate will skyrocket, creditors will begin reporting you to credit care bureaus, and your credit score will soon suffer. Ninety days is even worse. The credit score system is scaled by predicting whether you will be 90 days late on payments. If you pass that threshold even once, your score will plummet.
When to increase your credit limit
It may make sense to talk to your credit card company about increasing your credit limit. If you have a history of paying off bills and keeping well below your limit, credit card companies will be more understanding. But creditors will be more skeptical if you’ve already maxed out before making a request. You may experience fees, increased interest, and a lowered credit score if you request a limit increase when it’s too late.
Video: Understanding How Closing Credit Cards Affects Your Credit Score
Knowing the facts about payments and scores
How you distribute your credit limit across your cards does not matter. If you make big purchases, you may want to have at least one card with a high limit. But always try to keep your cards below at least 50% of their limit, preferably 25%. While it may seem risky to have larger outstanding debts, over the long term your score will improve more rapidly if you pay those debts off in time. Not paying in full won’t negatively affect your credit, but it will increase the amount of interest you pay. Your interest rate won’t affect your credit score if you pay off debts on time; however, if your credit score goes up, it should lower your interest rates eventually. If you want to increase your credit limit, make sure you do so in the right way. If you do, a higher credit score will be your reward.
Additional Resources:
Visa Customer Service
1-800-847-2911
MasterCard Customer Service
1-800-622-7747
Capital One Customer Service
1-800-955-7070
Discover Customer Service
1-800-347-2683
American Express Customer Service
1-800-668-2639
