Credit Line Increase: Good or Bad?

Yesterday, not fully knowing what a credit line increase entails, I requested one from Citibank and was approved. My initial, titillating, yesss-I-got-it! moment was quickly followed by bewildering thoughts of what-did-I-just-do, so I did some catch-up reading to make sure that a credit line increase was actually a good thing...

	Caveat debtor: A credit line increase is not always a good thing.

A credit line increase can be good when you don't define "credit available" as "cash available." "Cash available" is what you can afford to pay off in full when the credit card bill arrives at the end of the month; "credit available" is what the credit card company will allow you to charge, regardless of whether you can really afford it .

Some banks (like Citibank) will, when asked, gauge your creditworthiness based on your payment history before offering you an increase (or not). Other credit card companies offer automatic increases, calling them "rewards," without ever checking your individual circumstances. (If you don't want the increase, you can simply call the company to refuse it.)

Short story: Take the credit line increase
only if you won't use it anyway.

As long as you don't let a credit line increase affect your spending habits, it can be a positive influence on your credit score. Your credit score is based on a few key factors:

Things such as applying for too many credit cards in a short time period, or late/missing payments to anyone (from mortgages to department store credit cards, to car loans, to the installment plan for your computer or dining room set) will lower your credit score. Because FICO takes the percentage of available credit used as an indicator of creditworthiness, the less you use, the higher your credit score will be.

For more tips to improve your credit score...
For more info on credit cards limits...