Thursday, March 21, 2019
If you’ve got a credit card in good standing, then you probably receive frequent solicitations to increase your credit line. The offer is always tempting. But is it smart? Here are some reasons why increasing your credit line can be a good idea...followed by an important caveat!More purchasing power. Obviously, an increased credit line will allow you to buy more. If you’re short on funds - perhaps you’re in need of a home improvement or a special event is looming - a credit line increase could help you out in a tight spot.
An improved credit score. If you increase your credit line - and don’t use it or use only a small portion of it - you will actually improve your credit utilization ratio, which is the sum of your outstanding credit balances, divided by the sum of your total credit limit.
The opportunity for other loans. An increased credit line may also make it easier for you to get other lines of credit, such as a car or home loan, as it shows you’ve demonstrated a pattern of responsible credit behavior.
An emergency fund. A credit card with a higher limit can serve as your emergency fund, keeping it on hand in case something goes wrong, such as an unexpected car repair or medical bill.
The caveat? While the above are all good reasons to get a credit line increase, it’s all for naught should you max out that credit line and fail to pay it back within a short time frame. Accumulating more debt at a high interest rate will only hurt your credit score and your overall financial picture.
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