Credit Limit Question

[amol]

I have a Citi student credit card that I use for my regular purchases here and there (groceries, food, books, etc.). I always pay it in full and never carry a balance. They're offering to increase my credit limit by 1K from 1600 to 2600, though I've never had a statement that went over $1100 (and that was when I bought a laptop online for a credit card-less friend who gave me cash).

So I'm wondering ... what are the benefits (if any) of having a higher credit line even if you may not use it?

 

[Ns1]

Originally posted by: Amol
I have a Citi student credit card that I use for my regular purchases here and there (groceries, food, books, etc.). I always pay it in full and never carry a balance. They're offering to increase my credit limit by 1K from 1600 to 2600, though I've never had a statement that went over $1100 (and that was when I bought a laptop online for a credit card-less friend who gave me cash).

So I'm wondering ... what are the benefits (if any) of having a higher credit line even if you may not use it?

+ affect on credit scores due to debt/available credit ratio being lower (this may have changed with fico2008)

 

[OCGuy]

It doesnt hurt you to have the available credit, so why not?

Also, if you decide to carry a balance, it will help with your ratio.

 

[Strk]

Originally posted by: Ocguy31
It doesnt hurt you to have the available credit, so why not?

Also, if you decide to carry a balance, it will help with your ratio.

Technically, you always carry a balance if you use the car every month according to the report.

 

[dullard]

1) One day you will need more than $1000 in available credit. Self explanitory.

2) It can't hurt. People love to make up rediculous ideas of how higher limits will harm you, but it won't. Higher limits can't harm you.

3) It will likely help your credit score. A credit score is a form of measurement of how much companies trust you and how much you trust yourself. If other companies have had good enough experiences with you that they give you sizable lines of credit, then any NEW company will likely trust you. More trust means cheaper loans, cheaper insurance, and more likely that you'll get a job offer.

So, it will help, it can't hurt, and you'll need it someday. Pat yourself on the back, my friend, this is a good thing.

 

[spidey07]

Benefits as noted are a higher credit score.

 

[Viper GTS]

The only possible reason to turn down a higher limit is if you feel your self control (or lack thereof) will get you in trouble.

Aside from that there is absolutely no good reason to voluntarily select a lower limit, and plenty of good reasons to want a higher limit.

If you're actively using the card every month and not paying it off right before the statement date you will always show a balance (even if you PIF every statement). You may think you're never carrying a balance, but you look no different on your credit report than someone carrying a balance that only pays the minimum every month. Having a higher limit keeps your utilization down.

Viper GTS

 

[DrPizza]

Actually, you are hurting your credit score if you ever have a balance of $1100 on a $1500 limit, or even a balance over $500 at any time during the month. It does not matter if you pay it off at the end of the month or not. You never want to exceed 30 (or 35?)% of your credit limit.

 

[OCGuy]

Originally posted by: DrPizza
Actually, you are hurting your credit score if you ever have a balance of $1100 on a $1500 limit, or even a balance over $500 at any time during the month. It does not matter if you pay it off at the end of the month or not. You never want to exceed 30 (or 35?)% of your credit limit.

Not to piss in your cherrios Dr, but companies only report your balance once per month to the bureaus. Whatever time this happens to be (usually at the end of your billing cycle) is what your balance will show on your report. So if you run up $2000 on your card but pay it off before they report, you are fine.

 

[DrPizza]

Not to piss in your cherrios either, but:

Watch those balances. The less of your credit lines that you use, the better, even if you pay your balances every month. The credit bureaus and your credit scores don't distinguish between balances you pay off and those you carry month to month; the balance that's reported to the bureaus is typically the one that shows on your most recent monthly statement.

http://articles.moneycentral.m...dYourFICOScoreNow.aspx

Even if you pay your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report.

http://www.e-moneysolutions.com/credit_101.htm

I've found hundreds (thousands? I'm certainly not going to check every one of them) of references; need I go on? I was actually amazed when I first heard this, and if I'm not mistaken, I first heard this on an NPR interview with someone from one of the three major credit reporting agencies. Essentially, what he said was "never exceed 30% on any of your cards, even if you pay it off in full."

Unless, of course, you're implying that he should figure out exactly which date they report his balance & should adjust all of his payments perfectly so that he carries a minimal balance on that particular day of the month. Seems to me that it'd be a pain in the ass to not be able to use a credit card for about 1/4 of the month. "Wow, what a great deal! Too bad I can't buy it. This is the week my credit card company reports my balance to the credit reporting agencies. I can buy it next week though."