Friday, July 4, 2008

Higher Limits Beget Higher Limits


People often ask me how I ended up with such high credit limits.

Quite simply, it's just a matter of new creditors matching my established credit limits. Think about it: if I had four credit cards, and each of the limits were $500 each, what are the chances that a new creditor would issue me a $10,000 limit? Not very good. But what if my limits were $10,000 each? My chances would be a lot better, of course.

So how do you get your first high-limit card? First, you do your homework. You visit sites like creditboards.com, which has always been a favorite site of mine, and you figure out which creditors are known for giving out generous limits. Early on, I figured out that USAA, Pentagon Federal Credit Union, NASA Federal Credit Union, BMW, and others were excellent for granting solid initial limits. For me, Juniper turned out to be my first 5-figure credit limit. Not long thereafter, creditors were routinely granting me $10,000 limits and higher.

In addition to looking for creditors that are known for issuing high-limit cards, I also started combining cards that I had with just one issuer. For example, instead of keeping three Citibank cards, I have taken those three and combined them into one large-limit card (always trying to leave my oldest card as the card that survives, which helps preserve the age portion of my credit portfolio). Ditto with other credit-card companies. Now when I apply for new cards, issuers are more likely to grant me higher initial limits. After all, if I now have 12 cards, and all of them have an average limit of $25,000, then what is the point of a creditor giving me a $3,000 limit? It makes no sense. And that's why creditors constantly issue high-limit cards to me. It's simply a function of "higher limits begetting higher limits."

The higher-limit cards also help to keep my utilization ratios down. In one of my previous blog entries, I discussed the importance of utilization. The higher-limits-begets-higher-limits mantra plays into the utilization discussion perfectly.

Finally, the higher-limit cards, which help my utilization ratios, help to bolster my credit scores. Indeed, if you've got a bunch of cards with credit limits that are each above $25,000 it's tough to utilize much of the limit (that's especially true when you pay your bills in full each month). That in turn helps to keep your scores up. Keeping your score high means that it's much easier to get approved for new cards in the future.

6 comments:

Anonymous said...

Before I start, I just want to say I stumbled on this blog from CB and I love reading the advice given on here.

My question here today is not how to get higher limits but how much to ask for when you do so. Im fairly new on asking for a CLI so what is reasonable when trying to get a CLI. for example, I have 2 cc's with a limit of 10k, 1 with 8k, and another with 5k. The card with 8k is an american express blue. I would like to increase the limit on that card to as much as I can get. Is asking for a CLI to $15k reasonable or is it too much? Or how about even 20k? do u usually shoot higher or go safe by asking 10k to match the first 2 cards.

What did you do when your cards were still under 10k.

Credit Matters said...

Anon, I don't think asking for $15K is unreasonable. However, we're talking about American Express here. Given American Express's recent penchant to shoot first and ask questions later, I would move cautiously with them.

Have you read my American Express Game Plan? If not, do.

Were it me, I would try to match my highest limit. I would not try to make American Express your highest-limit card. Something about making American Express most vulnerable to you doesn't give me a good feeling. At least not in this credit environment.

This is where "knowing your creditor" comes in handy. Speaking of knowing your creditor, I have a column coming up next week that addresses that very issue.

Anon, there is no right answer here. But I'd err on the side of caution when it comes to Amex.

Meanwhile, I got a lot of my credit during the salad days of 2006 and 2007. It was a lot easier to get credit then. The key for me was getting a Juniper card that gave me $12,500 as a starting limit. After that, it was off to the races for me.

Then I started combining cards from the same lender. If I had two or three cards with Citibank, I combined all of my limits into one card. I'd leave the oldest card intact. I'd allow my newer cards to get closed.

Anyhow, we're in a much tougher world now. I'd advise caution. You don't want to get anyone's attention if you don't have to.

Tread lightly, Anon.

TheVibeRAIDER said...

Times have changed!

This week, I applied for and was approved for AMEX's Clear Card.

Currently, I use 3 credit cards with CL's of 40K, 25K, and 15K.

AMEX's approval? A whopping $2,000!

BTW, I know I wanted AMEX to get out of the credit card business. But, the Clear Card fits the bill (no pun intended) for now. I intend to treat it as a charge card.

GlobCredit.com said...

Wow. Just $2000? That's pretty amazing, especially when you consider your other credit limits.

Congrats on the approval, though.

Times have changed, indeed. Notice that I did not include this column in my 10 Most Important GlobCredit.com stories today.

Anonymous said...

Nice blog!! You mention USAA. I looked at their site and don't see a loophole for membership. Meaning, unless your affiliated with the US military you can't join, thus, not being able to partake in their credit cards. Is this correct?

Anonymous said...

You mention USAA in your blog. Is there any way to become a member if you are NOT a member of the armed forces?

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