credit limits

[desparate]

I'm trying to increase my credit score. It averages at 638. There will be a bankruptcy on my credit report for another 2 1/2 more years, and some other minor things should fall off as well.

I have a secured credit card right now with a 200 dollar limit, and the balance always shows relatively low on my monthly credit report updates. Right now my balance is showing 2 dollars on my report. I've had this card for about six months and it is kept in good order and I pay as agreed.

If I add to my security deposit to increase my credit limit, and maintain a low balance owed, will this increase my credit score ?


The electronic credit score adviser that comes with my Citibank Credit Monitoring service has the following comment about my credit score:

"You have a total of $198 available credit on your open revolving account(s). This only includes accounts for which the credit limit is reported.

This lowers your score. Having very little available credit is a negative factor, because lenders worry that you are living beyond your means and may not be able to repay them. Having a lot of available credit can be considered either positive or negative, depending on how well you have paid your bills in the past. On one hand, it indicates that lenders have trusted you with large credit limits and that you do not need to use all of the credit available to you. On the other hand, it increases your risk of getting too much into debt."


I don't understand what this means. How does having a low credit limit tell creditors that I'm living beyond my means ? I thought that using too much of your extended credit is what causes your score to go down. This is confusing.

[Lian]

FICO does not score your credit limits, it scores your percent utilization of each. A $100 balance on a $500 CL card scores the same as a $1000 balance on a $5,000 CL card.

Teh obvious problem with low CL cards is that even small purchases can boost your % util in a hurry. They require a lot more maintenance in order to maintain low utilization.

With all else being equal in the way of current balances, increasing your CL will necessarily lower your overall % util by giving you a larger denominator in the calculation. So, yes, increased CL can help your FICO score.

The normal tendency of most consumers, when their CL goes up, is to see a bigger credit cushion, and increase their balances proportionally. Since only % uti scores, that may give you no score increase.

The key is to monitor your % util.