How do I increase my credit utilization without decreasing my credit score?

Question

I have a Discover card with a limit of around $2000 ("Discover It"), which is very low. As a result, I end up putting my biggest purchases on debit, or use an alternative form of payment (eg. money order, bank transfer, ACH, etc.) I don't like doing this, so I applied for a higher line of credit but was denied. The reason quoted to me was that my utilization rate was too low.

Indeed, while I put all of my recurring bills (water, electricity, etc.) on credit card, and also my routine grocery/gas purchases, my credit utilization is only about 10%. I live rather frugally and well within my means. I've paid off my loans, including student debt and my mortgage.

Since I had some larger purchases I needed to make, but still under the limit, I put them on the Discover card. (Plane tickets, concert tickets, etc.) My credit utilization went up to 33% (ish), and my credit score promptly dropped 47 points. Now my application for a higher line of credit was denied because of a too-low credit score. (725 still seems pretty good to me, but I don't run a credit card company.)

It seems like I'm in a catch-22. When I increase my credit utilization so that I can apply for a larger line of credit, my credit score drops and I get denied for a too-low score. When I decrease my utilization and let my score climb back up, I get denied for too low utilization. (I've been experimenting for the past few months with this, varying how much I stick on the CC and how much I pay via debit/other methods. My HOA fees, for example, are a large recurring payment that I can pay via multiple methods so I can put various percentages of the fees onto the CC. ...)

How can I get a higher line of credit from Discover by increasing my utilization, but without negatively affecting my credit score? I make over $150,000, not including bonuses, and have a stable job, so these teensy little credit limits are driving me somewhat insane. I only have two credit cards for a combined total limit of $4200.

Answer 1

Sometimes the automated requests are more rigid and if you call them to ask for an increase they have more flexibility, but if you already tried that then it sounds like you might just need a different card.

Each credit card has it's own set of rules/characteristics, maybe the one you signed up for is a product intended for people with lower scores and lower income, so even though you have a fine credit score and income it might not suit you.

Your credit score and income are good, so most likely you should be able to get a higher limit from the jump with a new card. For example, Visa has 3 tiers of cards (Traditional, Signature, Infinite), many of the most popular cards are in the Signature tier and cards in that tier have a minimum credit limit of $5,000. You can browse the Visa Signature cards to see if one suits you. I would imagine Discover/Amex have similar product differentiation.

If calling doesn't do the trick and you want to stick with your current card then you could just keep using it at that 30-40% utilization range and paying it off and keep asking them for an increase. A new card doesn't hurt your score much and it's short-term, having a significant increase in your available credit and being able to spend normally without high utilization will far outweigh the initial blip from applying.