Should I accept a credit limit increase?

rhysevans256

Hi,

Apologies if my question has been answered elsewhere - I couldn’t find anything so here goes with my first post...

After finding myself in a bit of financial troubles a few years ago with credit cards maxed out, I have recently taken out a credit building card that had a £500 limit. The card company has now offered a credit increase to £1,000. I am trying to pay off the balance (obviously) and not using the card, but how would the credit increase, if accepted, affect my poor credit score? Would it improve it as the proportion of utilised credit would be lower, or worsen it as there would be more credit available to me?

Thanks in advance for any advice 👍🏻

[Deleted User]

You should accept it - your current limit is very low.

It will probably drop your poor credit score further, but lenders will view you more positively.

Accept any and all future increases.

Willing2Learn

A credit limit increase means that lenders are starting to trust you, and I believe will have a positive effect on how you are scored by lenders.

Ignore your credit score as lenders don't see it and don't use it.

PixelPound

You've maxed out cards in the past, so how likely are you to do that again? If it will be a temptation then increasing your limit may not be good. It's easy to accept but then we come to the run up to Christmas and there is that "extra £500 just sitting there" ... Of course if that is all in the past and you know the extra limit isn't your money and you can resist temptation and continue paying the debt off, then by all means accept it as it will lower your utilisation percentage.

As to credit score - what's happened to your maxed out cards? Have they been paid off, have they defaulted and maybe a payment plan in place? Don't expect an increase in your credit limit to make much of an impact as utilisation is a lesser factor and it depends what else is making the score poor.

LynnForest

I would accept that increase

Ben8282

Your OP would imply that you have had difficulties in the past and your having to take out a credit builder card would imply that you lost the maxed out credit card accounts due to default or you would still have them and not need the credit builder card.
The credit builder card has a limit of £500. Clearly you are finding it difficult to repay even this small balance as you say that you are trying to pay off the balance and not using the card.
The mention of credit scores and utilisation % unfortunately clouds the issue as is likely to encourage replies concentrating on this, telling you yes increase the limit because your utilisation % would drop from 100% to 50% if you doubled your credit limit, give the appearance that lenders trust you and would therefore look better from that perspective. This would generally speaking be good advice. However, the only reason you would be interested in improving your credit score would be because you were seeking to make it easier for you to obtain further credit.
Obviously you are paying interest, probably at a high APR, on this balance. The credit builder card issuer is probably expecting you to immediately make use of the increased credit limit and are eagerly awaiting the extra interest that they will be able to charge you.
I am therefore going to suggest that the credit limit increase should not be accepted at this time.


I suppose I should also point out to you that credit scores are, in themselves, meaningless and it is the information contained in your credit files that is important and not the credit score which is a marketing tool used by CRA's to get people to sign up to their services and/or expose them to revenue generating marketing material.

PRAISETHESUN

Unless you are likely to spend the extra £500 and get yourself into more debt then I would accept the limit increase. Having higher limits is generally seen as a positive by lenders as it shows you can be trusted with more credit.

Ignore any reference to your credit "score/rating" and focus instead on the actual contents of your credit files. You don't mention if you have missed payments, defaults or arrangements to pay on your file, which will significantly trash your ability to get credit until they are removed. Provided this is not the case, then any limit increases will generally improve your credit history if the accounts are managed correctly.

SnowTiger

rhysevans256 wrote: »

After finding myself in a bit of financial troubles a few years ago with credit cards maxed out, I have recently taken out a credit building card that had a £500 limit. The card company has now offered a credit increase to £1,000. I am trying to pay off the balance (obviously) and not using the card...

Your post suggests you've recently got a new credit card and are already struggling to pay off a balance of a few hundred pounds (in full): 'trying to pay off the balance' and 'not using the card'.

I'm going to go against the grain here and suggest you don't accept the limit increase.

sleepyjones

I would probably agree and say don't take the increase, unless you're trying to build your credit for a reason, ie a big purchase.

I guess it's your call, having an increased limit will be better for you as far as a credit history but you have to be able to trust yourself to not spend money that you cannot afford to repay.

PixelPound

OP has not been back but advice should be to refuse it, in this circumstance. Anyone who says they are "trying" to pay the balance on a card with a £500 credit limit is definitely struggling and as they have had cards that have defaulted before then not a good idea to get extra credit.

beanybot

Poor "template" advice from the regulars here unfortunately of "accept the limit" without really thinking about the individuals circumstances...

Anyone who says "I am trying to pay off the balance (obviously) and not using the card" on a 500 limit! should absolutely NOT accept the increase. this will likely lead them to more debt.