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  Dear
Dr. Don,
Since I am planning to purchase a home, should I request credit
limit increases on several credit cards that I have? (My credit
scores are in great standing and the credit card companies
have offered me the credit limit increases.) If I accept the
credit limit increase offers, how much should I increase my
credit limit?
-- Damon Debtor
 Dear
Damon,
Your credit score is based on the information in your credit
report. Increasing your credit limits reduces the ratio of
card balances to card limits. Overall that's good for your
credit score. The downside of this is it reduces your capacity
for additional credit. Lenders consider the amount of credit
available to you as part of their decision to extend you credit.
A lender doesn't want to see that you're maxed out on your
credit lines, but they are also concerned that you could use
the available lines and that would diminish your ability to
repay your debt. Let's take an extreme case where you have
a $100,000 limit on your titanium credit card and currently
carry a $5,000 balance on that account. You can borrow an
additional $95,000 on that account. If you max out that account,
it changes your ability to pay that and other debts.
Think through your motivation in applying for credit limit
increases. If your credit scores are already good enough to
get a lender's best rate on a loan, then trying to boost your
FICO score isn't necessary. If you're worried that you'll
need to have more credit available because decorating and
furnishing your new place is going to drive up your credit
card balances, that's a separate matter. Increasing your credit
lines before getting the mortgage should make it easier to
get the increase approved by the lender.
Without knowing your income, expenses, and ability to manage
credit, it's impossible for me to recommend how much of an
increase in your credit lines may be appropriate. Look at
your current ratio of card balances/card limits and your past
approach in paying down these balances. If you have a history
of letting balances remain outstanding on your credit card
over time, increasing the potential size of that balance isn't
a good thing.
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