A good reason to ask for a higher credit card limit
Chances are, you've never asked for a higher limit on your credit card, but it's a step you may want to consider.
Raising your limit can have a surprising benefit: It can also lift a consumer's credit score, according to new research from Bankrate.com. That's because a higher bar on your credit limit can help improve your "credit utilization rate," or how much credit you're using divided by how much credit you have available.
Doing this may not be advisable for consumers who have a hard time reining in spending or paying down their card balances each month. But for those who are responsible spenders, asking for a higher credit limit can be beneficial to their credit scores, which can help secure lower interest rates for mortgages and auto loans, for example.
The good news is that almost eight out of 10 consumers who have asked for higher credit card limits succeeded in getting them, Bankrate.com found.
"It comes down to the amount of credit you have offered to you versus how much you are using," said Mike Cetera, personal loans and credit analyst at Bankrate. "If you call your credit card company and ask for a bigger line, like about another $1,000 or $1,500, and don't use it, it'll lower your credit utilization rate, which will improve your credit score."
The credit utilization rate accounts for about 30 percent of a person's FICO score, he noted. Despite this technique, most Americans have never asked for a higher credit limit; Bankrate found that only 28 percent have asked.
"The surprising thing here is the low number of people who have actually tried to do this," Cetera said. "I think it's probably a function of people not realizing it's something that's available to them."
Some consumers are more likely to be successful than others. Eight out of 10 Americans over 30 years old said they received higher credit limits when they asked, compared with less than half of those 18 to 29. Eighty-four percent of cardholders with annual household income of more than $30,000 received higher credit limits, compared with just 60 percent of those below $30,000 in annual income.
"If you're in a good financial position, this won't hurt you," Cetera said. "But if you're new to the card or new to credit in general, you may want to wait a little bit."