One of the top questions that I have was if I currently have a credit card, and I’m not comfortable opening another credit card for whatever reason, totally understandable. How can I increase my credit limit? Is it all upon approval, and then that’s the end of the story? The answer is no. You can always increase your credit limit. All you’re going to do is just to call the number on the back of your card and ask the operator to improve your credit line.
The way you’re going to go about it is as follows. “Hello, my name is such and such. How’s your day going? Oh, great to hear, and so listen, I’m trying to make a large purchase here. I was wondering if you can help me increase my credit limit. It will be lovely if I can leverage your credit card because of whatever the benefits, because of your points.” Then chances are this person’s going to ask you, “Okay. How much money do you need?” Don’t be greedy. Be reasonable.
How To Increase Credit Limit
If your credit limit is 5,000, go for, let’s say, an increase up to 7,500, don’t go ballistic, don’t ask for 10,000, don’t ask for a 15 because chances are you haven’t established that relationship yet to spend that large amount of money. Some of you might have a credit history that has gone on for a long time. Maybe you probably have an 800 and something score, but you usually will spend in chunks of like 50 or $200. You don’t want to get an automatic denial by asking for such a massive increase.
They’re going to go ahead, and they’re going to inform you, “Hey, okay, we can do that, but it’s not guaranteed.” They’re going to run your credit. You will get a hard pull in you’re credited, but again, that’s somewhat irrelevant. Your credit will go down maybe by two points, but once the new credit kicks in, it’s going to increase your credit score, and that’s how you do it. You call the bank, and you explain what you need the money.
You don’t have to give them a lot of details. Just keep it at a very high level. I’m trying to make a large purchase or improve my kitchen, something at a very high level and not too many details. They’re going to go ahead and pull the credit, and “Voila, here’s your higher credit line,” and again, a new credit score. If I decide to open a new credit card, am I only limited to the amount of money they want to approve?. No, you’re not.
All you’re going to do is call that number immediately as soon as you’re approved online for that credit card. You’re going to go ahead and do the same thing. You’re going to tell them that you’re trying to make a large purchase. You were hoping that the credit card company would approve you just about what you need. If they approve you $10,000, then you’re going to go ahead and ask, “Hey, can you bump it up to 15? The purchase is 14,000, but I don’t like to hit all the way and max out of the card. I want to leave a little room to juggle in between,” and that’s it.
They’re going to do the same process and run your credit and say hi to you and your credit card. What will happen, and all of those credit cards and I don’t use them will decrease my credit limit? In my experience, no. I have, I think, twenty-something credit cards at this point. My historical usage has been like six credit cards, give a chance. As of last year in 2018, I just went on a rampage, and I applied for a bunch of credit cards and believed it or not is easy to use all of these credit cards.
All you are going to make sure is just to use the cards on automatic payments? Let’s say, for example, the way I do it is I have 24 credit cards, right? I have one that I use specifically just to pay my rent. I have one that I specifically use to cover my gas. I have one for my iTunes account. I have one from a Netflix account, and then I have one for my laundry card. I have one for my Hulu account, and next thing you know, just spreading out your expenses in multiple credit cards is going to keep those cars active.
You always have the choice to freeze. Some people choose to do that because they want to protect themselves from identity theft. I have never frozen a credit card account. If you’re going to give it a try, please let me know because I would love to learn what your experience is like. I can either create a video with you or share your story about what to expect when somebody freezes their credit card account.
Never close your credit card
If I have a credit card that I usually don’t use, and I don’t see its benefit, should I just close it and just move on to open a new credit card? The answer is no, never close a credit card. Here’s why you can freeze it but never close it. The reason why your credit score goes on is that it´s evaluated in different categories. One is timely payments. The other one is the length of your credit history. The other one is the total credit line, and the other one is the number of inquiries.
This is just about credit cards. There’s also another factor, which is there’s also a credit mix, which is another factor. What a credit limit refers to is the type of credit that you have. Anything from revolving credit, which is a credit card, and of course, non-revolving that has to do with car loans, mortgage, anything that you pay down, and stops right there.
I suppose to credit cards where you can pay it down and then use it again, pay it down and use it again. We’re going to focus on these four for simplicity because these are the ones that your credit cards aren’t directly impacted by. We have these four factors right here. That’d all have the same weight, and the way it works is that it’s broken down as the following.
As you can see here, the mix of credit is only small. It’s a 10% out of your total credit score, which is why I decided to focus on these top four for simplicity reasons because not all of us can have of our to credit, but if you do, just keep in mind that this is how it’s going to affect your credit score. When you close on a credit card, part of your credit score is focused on credit length. How long have you had your credit history? That’s a total of 15% out of your credit score, and let’s assume that that credit card that you don’t like, it’s ten years old, right?
If you have a car that’s ten years, that’s evidencing that you have a good history for over ten years, hopefully. If you didn’t, you had ten years to fix it but assuming that you have an excellent credit history for ten years, that will show that you have some type of a good relationship with your money, with payments, and also with the bank.
If you choose to close this account, that old card you don’t like, you’re wiping ten years out of your credit history. By opening a new credit card, you’re going to have zero years, which will bring down the average of all of the other credit cards you have. If you have ten years, you have one account for 5, one version for another 5, then one seven and one for two years. Having this ten here is going to bring the average up of all of these accounts.
If you close it down and decide to open a new one, the average will go down, and therefore your credit will go down. Remember what I said about it? If you open an inquiry, your credit score will go down slowly. That’s because of the weight, and it’s only 10%. If you open three credit cards, it’s going to go down to six points, big deal.
When you increase your credit line, your debt ratio to your total amount of credit lines will decrease. The more credit cards that you open, the higher your credit score is going to be because the least amount of debt you have and the higher the credit line that you have, you get the chance to either increase or decrease your credit by 30%, as opposed to the 15%. Of course, timely payments. That’s no secret.
We all want to show that you have a good relationship with the bank, and by delivering timely payments, your credit is increasing by 35% every time you make a nice payment. It also depends on the amount. If you can’t afford to pay it down ultimately, go-ahead goes ahead and do so, but if you don’t, please pay above the minimum.
When you can, try to open another credit card and just roll over the balance to a 0% credit card. That way, you can pay down the balance faster. Of course, this is something that has worked for me. It might not necessarily work for you, so you’re going to have to access where you’re comfortable with. If you’re comfortable opening more new credit cards or you’re just merely paying down the debt, I’ll leave that entirely up to you.
RESOURCES & LINKS MENTIONED IN THIS EPISODE:
– Recommended Credit Cards: https://go.www.novariseinvest.com/credit-cards
– Chase Sapphire (Sign up bonus): http://bit.ly/Sapphire-Chase
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