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A credit card I currently use offered me a credit limit increase. The current limit is $2500; I rarely spend over $500 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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    In my experience when the bank initiates the limit increase it's a soft pull, but when I initiate it it's sometimes a soft pull and sometimes a hard pull depending on the bank. – TTT Mar 8 '17 at 14:44
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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.

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    +1 - I added an answer to discuss account age. New cards' impact on account age takes years to pass, unless the card is cancelled after a bonus period has expired. – JoeTaxpayer Sep 15 '12 at 14:52
  • Well, in this particular situation Citi assured me there would be no hard pull. There's one advantage. – Brad Koch Sep 18 '12 at 3:45
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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.

  • Wow. A great answer on this one. For point one - I've had cards shut down due to 'suspicious' usage. Once, when I was making my annual charity donations. Easy, as I was home, and just had to make a call. The other time, I was in a store on vacation, and no time or privacy to make the call on the spot, so the 2nd card was right there. – JoeTaxpayer Mar 8 '17 at 14:57
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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.

  • I've read that credit cards you cancel do not fall off your credit report until 10 years after. This leads me to understand that even if you cancel a card, that cancelled card's age is averaged into the "Length of credit history" for 10 years. – Sun Sep 5 '14 at 16:28
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    @SunWKim - Correct. So, when I cleaned up what I thought was "too many" accounts, and cancelled a few card a decade ago, I just saw my score drop as those accounts just fell off my report. – JoeTaxpayer Sep 5 '14 at 19:05

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