Wednesday, 13 May 2020

Pros & Cons Of Raising Your Credit Limit

Pros & Cons Of Raising Your Credit Limit

I am going to be talking about the advantages and the disadvantages of raising your credit. Should you do it, I will give you my recommendation and how you can also do this as well. 




Advantage: Flaunting

If you have a higher credit limit you can flex on all your friends and for whatever reason, you want to do that you can go ahead and do that. Stop flexing on people with your credit limit it is not cool, it doesn't matter if someone has a $100,000 limit and you have a $10,000 limit it doesn't make them better than you. 


Advantage: Flexibility On Purchases

Whether you are a corporate worker, student, or someone in the business. It depends on how you spend that money if you can pay it back which is a big deal or not. But for the most part, if you have the flexibility to make large purchases that you know you are going to pay back, that is a huge advantage. 


Disadvantages

If you are unable to pay back things and say you are Jimmy, you just got a $15,000 credit limit, you just graduated college you don't know what to do with yourself and you max out that credit limit, but you only make $1,000 a month and you are already $14,000 in debt. That is a huge disadvantage and that is an awful way of just using your credit limit to your advantage. It pulls you down because you will end up paying interest, you end up increasing your utilization and therefore you just decree your overall credit score. That is not the way you want to take advantage of credit limit increases. You really want to be able to spend what you have. 


Disadvantages

When you increase your credit limit another disadvantage that comes with this is that credit card companies will sometimes do a hard poll, so I know for like discover card they won't do that, I know for Ober Barclaycard though they did that to me they cost a hard pull, or if you do it with American Express or chase sometimes they will do a hard pull on your account, it depends on what your history is with that credit card company and what you do. For the most part, though, they are going to do a hard pull unless it is stated. 


Disadvantages: Financial Review

Banks can do something called a financial review or they could just deny you for that. And if they do a hard pull then it will just hurt your credit score temporarily, but when a credit card company or bank determines that you may be risky because you have such a high credit limit then they can do something called a financial review and when they do that they put everything on hold you can not use your card and they request bank statements, taxes, they just want to see if you are making the money that you say you are making. And it is definitely good to stay away from that you don't want to pause your credit card, you don't want to have to go through that process because it can be long and tedious and it is just annoying.

The way you can avoid that is to make sure that your credit limit is not as high as your annual salary coming in, say, for example, we got Hill Billy Joe making $10,000 a year. You don't want Joe to have an $8,000 even a $6,000 credit limit, I mean, you want to keep your credit limit just a little under what you are making. If he has a $10,000 credit limit and he's making $10,000 it is a little shady. 

In my opinion, mine is definitely over 50% of what I have and I have not had a financial review yet, but what I do is I have credit limits placed on different companies so I don't have my eggs place all in one basket, I don't have an $80,000 credit limit with just chase, it is going to be all spread out between different companies. Make sure you do that as well.

My Tips And Tricks


Ask And You Will Receive

The statistic is that 80% of people that request an increase in their credit limit get it. 


Call Your Bank Or Credit Card Company Before You Request For Credit Card increase.

Before you go for that credit card limit increase go ahead and call your bank or credit card company ask him if it is going to do a hard pull on your account. 99% of the time they would tell you yes or no, if it is then, you may want to re-evaluate and see whether or not you should get that credit line increase. If it is not a hard pull if it is a soft pull then go-ahead 100% and do it increase your credit limit. Just make sure that you take into account how many lines of that you already have with all your account. 


Know Your Why

The main thing I need to emphasize though is you need to know your why. Why are you trying to increase your limit? Are just trying to flex on people, are you trying to piggyback method and increase your credit limit so you can help other people by adding them as authorized users. You need to figure out why you are trying to increase your credit limit. Do you have a low credit limit right now and you just want to increase it because of any emergency situation or because of anything that could happen in the future. Do you want to show lenders that you have a high credit limit with this bank so maybe they match you if you about to get a mortgage or car loan or sign up for another credit card company?

You need to figure out your why, but if you are doing it for a reason such as being able to just flex on people it just not worth it because you don't want to be in a situation where you have to get a financial review or credit card company put a flag on your account because you have such a high credit. 

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