How To Increase Your Credit Scores With One Short Phone Call
By Stephen Snyder
"One of the quickest ways to increase your scores is to increase your card limits."Pretty simple, huh?
Now let me explain why something so easy can have such a great impact.
Let's imagine you have 10 cards each with a $1,000 limit. So you have a total (or aggregate) card limit of $10,000.
Now let's assume that five of these cards are maxed out. In this case, you have a total (or aggregate) card balance of $5,000. Your balance-to-limit ratio is now 50%. You've used $5,000 of your $10,000 total limit. This is called your "revolving utilization." It's the total amount of your limits that you are currently using.
Being 50% utilized is considered high by most lenders' standards...and more importantly...by the creators of the FICO score.
But now watch what happens.
You pick up the telephone and ask for a limit increase on each of the five cards you haven't maxed out. Let's suppose each of the five lenders doubles your limit. So now you have 5 cards with a $2,000 limit and a $0 balance. But you also have 5 cards with a $1,000 limit with no available credit.
By increasing your limits you've just reduced your balance-to-limit ratio from 50% to 33%. And if you doubled the limit on the other 5 cards in this example, your balance-to-limit ratio would be 25%.
That's a significant decrease in your ratio!
Bravo! You've just increased your scores by making a few free telephone calls.
However, there are some potential pitfalls with this strategy. When you ask for a limit increase it will cause a inquiry...the type that lowers your scores.
So, to be safe, apply for all limit increases within a 14-day period. Here's why.
Credit Scoring TipWhen calling to increase the limit of cards issued by banks or unions, there's a good chance multiple inquiries will be counted as only one, minimizing the impact several inquiries could have on your scores.
In the past, you've seen me write about how, when you apply for a mortgage or comparison shop to buy a car, you should always do it within a 14-day period since mortgage and auto inquiries made within this timeframe count as only one inquiry.
Well, the same can be true when you ask your bank or union to increase your limits. This is the first time I've revealed this tip.
The reason this works is because the FICO scoring models can't usually distinguish why a bank or union is inquiring about your credit. In other words, there's no way to tell if the bank is inquiring about your in order to approve you for a mortgage or because they want to increase your limit. So it errs on the side of the consumer because you COULD be applying for a mortgage or auto loan from a bank or union. In this case it groups all inquiries within 14 days and counts them as only 1. This is very much in your favor.
But even if you do get stung by a few inquiries, generally your reduced utilization percentage will outweigh any negative effect of the inquiries—as long as you don't go on a shopping spree afterwards!
That brings me to the second pitfall...
Increasing Limits is NOT a "Spend More Money" StrategyIf you go out and use up the newly available you'll be back in the same situation with your scores (and you will owe even more money). So don't make that mistake.
Think of your increased limit as overdraft protection on a checking account. You're not supposed to ever use it...but it's nice to have just in case.
Use this Technique to Increase Your Scores Every Six MonthsFrom personal experience, I've found that you
can request that your limits be increased about once every six months—as long as you put yourself in a position to deserve an increase.
In order for the card companies to increase your limits, you obviously need a good payment history with them. If you continually make late payments or have a large balance, odds are they won't increase your limit. So keep this in mind when you ask for limit increases.
At minimum you should: pay your bills early or on time, pay more than the minimum amount due, and/or pay off your balance each month.
Article Source: http://www.articles-galore.com
Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that provides free bankruptcy information and recovery steps. Stephen also writes a free weekly newsletter on bankruptcy recovery.
Products and Services mentioned in this article are available Here
