E G: Credit Score following A Hard Inquiry with Credit Increase?
First, I apologize for the length of this post. I’m re-posting this b/c the answers I got were rather suspect. Two of the answers I got were:
1. Your available credit limit doesn’t do anything to improve your score.
2. your is NOT going to increase quickly by getting more credit or higher credit limits
However, I found these on 2 separate credit reports which contradict the above earlier answers:
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“Your report shows the average credit limit amount across open, recently reported bankcard accounts, such as a Visa or Mastercard, is too low. Having low credit limits can have a negative impact on your credit score.”
“The available credit on your open bank credit card accounts is too low. Having credit available to you is a sign that you are able to manage your finances responsibly. Lenders usually like to see that consumers have a large amount of credit available to them.”
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My original post was this:
I am in the process of rebuilding my credit. So far, I’ve gone from my scores being in the toilet to an FICO score of 640. Obviously, I still have more work to do.
My credit line for two cards totaled $ 1100 ($ 600 and $ 500). After over a year with one card and 6 months with another card (with no late payments), I applied for a NEW card from a major U.S. bank. I was approved and issued a card from them with a $ 2000 line. I do have other credit accounts (2 auto loans, one for two years and one for one year and one I just paid off in January–no late payments on any of them). But here are my two questions:
1. My score probably took a hit from the hard inquiry on the newly issued card from the major bank. However, my available credit increased from $ 1100 to $ 3100. Is it possible that the increase will cancel out the hard inquiry?
2. Also, would it be recommended to obtain another card or sit steady with these 3? My thinking is that if I get another card with a line of $ 1000 and up, this will increase my score fairly quickly as opposed to sitting tight on 3 cards, two of which have lines under $ 700 each. BTW, I keep a low balance (under 35%) on all cards I currently own.
IF YOU KNOW WHAT YOU ARE TALKING ABOUT, any insight and help is appreciated.
Answers and Views:
Answer by anywhoo
Low (toy) credit limits do hurt your scores. Lenders also see the low limits and tend to think that you may be a risk. But since you are rebuilding, and the oldest credit card is a little over a year old, then it will probably hurt you more at this point to close the toy cards. Since you are ‘rebuilding’ you didn’t mention if you still have any negatives on your reports. If you do then closing the toy cards will certainly hurt more than help.
I would suggest waiting at least 4 to 6 months before trying to get another card that has a better credit limit. Since your oldest card is still fairly young, and you’ve added a couple more cards within the past 6 months, then you might end up with another toy limit. It takes time to build/rebuild, you can’t do it overnight.
I don’t know what creditors you are dealing with but you should try to see if they will give you credit limit increases. If it’s Orchard/HSBC they more than likely won’t do it right now. If it’s Capital One then you should have been given the credit steps credit limit increases, if you hadn’t then call and ask about the credit step increases. If you’ve already had the credit step increases then they more than likely won’t increase it now. If you have a GEMB store card then hit the ‘request credit limit increase’ (love) button on the site every 4 to 5 months. If you have a Citi card then see if a ‘request credit limit increase’ button is showing up, if it is then hit it .. but .. if it gives you a form to fill out then don’t do it, just leave the page. With Citi, if there is a form that they request you fill out for the limit increase then it means they will pull a hard inquiry, if there is no form then it will be a soft inquiry. As you can see, each lender is a little different in how they handle credit increase requests.
I doubt the increase will cancel out the hard inquiry. If you have a thin file, which it sounds like, then the inquiry could impact you for 7-10 points, more or less. Then when the new card starts to report it will lower your average age of accounts, which could lower your score a bit more. On the positive side, the higher credit limit will help with your overall utilization, though since you keep your balances low, which is great, then the extra credit limit isn’t going to be a huge factor.
If you don’t belong to a credit union, join one or two.
You might go to the site I’ve listed in the source box and do some reading in the Credit Forum. It’s a free site where you can do some reading/ask questions about rebuilding your credit.
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