Are there any advantages to a credit limit increase as opposed to a new card?
A credit card I currently use offered me a credit limit increase. The current limit is 00; I rarely spend over 0 on that card.
Let's say you have a legitimate reason for wanting more credit. My understanding is that requesting a credit limit increase and a new card both cause a hard pull. Since a lot of cards offer new sign up incentives, shouldn't you instead opt for one of those, assuming you can find an offer worth taking? Is there any advantage to getting a credit limit increase as opposed to getting a new card, assuming your current limit is already sufficient?
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These are similar but one outcome is easier to manager
first:
Hard Pull does negatively effect credit slightly ("new credit" on that chart)
second:
A lower credit utilization ratio ("amounts owed" on the chart) increases your credit greater than a hard pull does.
In both scenarios (getting a new card vs increase on an existing card), if approved, you will have a lower credit utilization ratio, thereby increasing your credit if you keep that ratio low and pay minimums.
But if you just keep one card, and that card has a higher limit, then you will have more flexibility on the size of purchases you can make without effecting your utilization ratio. Making the option of a credit increase on an existing card easier to manage.
It is also more likely to get approved for a greater credit increase on an existing card than getting approved for a new card. (ie. its more likely you may get a store-specific nonvisa/nonmastercard/nonamericanexpress card, or a card with a low limit). So if you want to take chances with your hard pulls, know what you are more likely to get instead of wasting a hard pull.
There are lots of reasons to choose a credit card: effect on your score would not be the top one for me. I would use, in order:
having at least two cards so if one is compromised and you're waiting for your new card to come in the mail, you still have one
having different rewards perks - eg 1 card gives 4% at the grocery store, 1% elsewhere, while another gives 4% at the drugstore, 1% elsewhere. Use whichever card give you 4% at the store you're in
having an alternate brand for the "we only take visa" or "we only take mastercard" scenarios - these are rarer these days, but still happen
enjoying a generous signup bonus
simplifying personal accounting such as using one card only for vacation expenses or one for needs and one for wants
And as downside:
two annual fees if you're choosing cards with fees
two bills to pay and possibly a service charge for paying the bill
This leads me to having 2 or 3 personal cards, no more. If I have a legit need for credit above their total limits, I would meet that by allowing the limits to be raised, not by getting a 4th or 5th card.
One of the scoring factors is average age of accounts. That score is dinged for new ones (obviously) but looking ahead, I'd rather have 5 10 year old accounts than 1 account with a high credit line.
In How Old is Your Credit Card I show the range of scores vs age of accounts. Ideally, you want your credit cards to be over 8 years old. Now, if only my 13 year old card issuer would stop having security breaches and when issuing a new card treat it as brand new, I'd be happier.
The sign up incentives will impact your score, of course. It's a game you should be very careful playing, especially up to two years prior to buying a home or refinancing.
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