Today I got quite the unexpected surprise in the mail. Capital One sent me a letter and I figured it was more spam like a car loan, home loan or credit card offer. I was just going to throw it away like I do with the other junk mail I get on a daily basis.
What The Letter Said
But boy am I glad I didn’t. I opened it up and I was pleasantly surprised to find a note stating they had raised my credit limit on my credit card. They didn’t just raise by a little bit. They raised it by $5,000. So I went from $7,500 to $12,500 right away.
What This Means To My Credit Score
No I’m not thrilled about this because I plan on maxing out my credit card. There’s a juicier reason. I am excited about it because this action has immediately raised my credit score! Let me explain why.
My Previous Credit Utilization Rate
On my previous $7500 limit I was using about $3500 worth of it. This was more than I would have liked as I was utilizing about 50% of my available credit. Surely this was affecting my score as I’ve heard that 25% is a good credit utilization rate.
My New Credit Utilization Rate
Now with my new $12,500 limit I am down to using only 29% of my available credit! Since I may refinance my home loan in the coming years this new credit utilization percentage will surely end up saving me thousands of dollars in the long run.
Background On The Credit Card Account
This Capital One credit card account was a 15-year-old account in good standing with no history of late payments.
I had been stuck at this $7500 credit limit for the last 10 years and I had been unsuccessful at getting an increase in the past.
My Previous Attempt
Four months ago I asked for an increase in my credit limit only to be rejected by the system automatically. I figured I would give it a shot since the economy seems to be recovering quite nicely after suffering through a recession for 5+ years.
I usually kept my balance low at about $1000-$2000. But recently some bills came and got piled up so my balance ballooned to over $4000 for a while.
I am assuming this is why Capital One decided to give me more credit. I guess they are hoping I continue to rack up charges all the way up over $10,000 so they can score some serious interest off of me.
Unfortunately for them I don’t play that game and will be paying down my balance in the coming months hopefully so I can get that credit utilization rate down to the 15 to 20% range.
What This Means For Others
If you were in the same boat as me, trying to get a credit limit increase, don’t despair because it may happen in the near future. As credit card companies begin to have more confidence in the economy they will also get more confidence in the consumer as well.
If you continue to make your payments and use your card responsibly hopefully at some point the credit card company will see that you are worthy of a credit limit increase. There’s no limit to the number of times you can try, so it doesn’t hurt to keep asking every few months.