I live in Canada and have an emergency fund that is pretty healthy, a savings account that is modest and I always live within my means. I have a house and car and these are the only debts and I always pay off the balance of my credit card in full when it arrives through the door. However my bank recently offered a raise on my credit card and it can be raised by quite a substantial amount. But I have no plans of using the extra credit if I go for it. What I am wondering is if there would be a downside to raising the amount if I don’t plan on using it.
One thing in your favour by raising the credit card limit is that it would go towards helping you with your credit rating, more so if you don’t plan on using the extra credit the bank is offering you. A large part of the credit score is determined by the usage ratio, this is the percentage of the credit available to you in the month. An example of this would be that if you spend around $200 per month on the card and the limit on the card is $2000, you use 10% of the credit that is available to you. However if this limit was raised to $4000 and the spending was $200 then this would mean the ratio would be down to just 5% and the credit score would increase.
So essentially the more credit you have and the less you use it, the better your credit score should be. However this doesn’t mean that you should go out and get many credit cards and use them as this will bring down your credit score. If possible you should pay off the credit card bill each month before the actual date it is due.
