Does Lowering Your Credit Limit Help You Get Approved For More Credit Cards?

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Does Lowering Your Credit Limit Help You Get Approved For More Credit Cards?

Million Mile Secrets reader Leighton commented:

Does a request to lower a credit card limit improve your chances for being approved for another credit card with the same bank, and will it afffect your credit score?

Does Lowering Your Credit Limit Help You Get Approved For More Credit Cards

Does Lowering Your Credit Limit Help You Get More Credit Cards?

Leighton wants to know if reducing his credit limit on a credit card will help him get approved for a second credit card from the same bank.

Lowering Your Credit Limit

Let’s say that Leighton has a Chase Sapphire Preferred card and wants to apply for the Chase Freedom because of the signup bonus.  But he’s not sure he will get approved for a second card from Chase.  So should he lower his credit limit on the Chase Sapphire Preferred?

Leighton could reduce his line of credit on his Chase Sapphire Preferred card, by calling the number at the back of his card, especially if he’s close to the maximum amount of credit which the bank will extend to him.

Most banks set a limit on the TOTAL credit amount which they will extend to you.  This limit is based on the bank’s internal risk-taking (or underwriting) policy, your income, length of credit history, and other variables on your credit report.

You may reach this total limit with 2, 3, or 4 or more credit cards, depending on the credit limit assigned to each credit card.

Once you reach this limit, banks will no longer extend you any new credit because doing so will increase the bank’s risk exposure.

So it is reasonable to think that lowering your credit line in advance could help you get approved for a new card.

But reducing your credit line may not be the best option and could actually decrease your credit score if you have few credit cards.

Transferring Your Credit Limit

Instead of lowering his line of credit on his Chase Sapphire Preferred in advance, Leighton could just apply for the Chase Freedom card.

He can then call and ask to transfer credit from his Chase Sapphire Preferred card to his Chase Freedom card.

That way he gets to keep his total credit line and get approved for a new card.

What Is A Credit Score?

A credit score is a 3-digit score used by banks to help predict if Leighton will pay back loans.  Fair Issac Corporation (FICO) issues FICO scores ranging from 300 to 850.

There are 3 main credit bureaus in the US – Equifax, TransUnion & Experian – and Leighton will have 1 credit score from each bureau.

How Is Your Credit Score Calculated?

According to the FICO website, Leighton’s credit score is determined by:

  • 35% Payment History — (Do you pay on time?)
  • 30% Amounts Owed –  (Do you use a lot or little credit?)
  • 15% Length of Credit History — (How long have you had credit?)
  • 10% New Credit — (Have you applied for credit recently?)
  • 10% Types of Credit — (Do you have different credit types?)
Does Lowering Your Credit Limit Help You Get Approved For More Credit Cards

30% Of Leighton’s Credit Score Is Determined By How Much Credit He Uses

Leighton’s Payment History is the most important factor in determining his credit score.

The second most important factor are the Amounts Owed.  Having debt doesn’t necessarily mean that Leighton is a high-risk borrower.

But if Leighton uses a lot of his available credit (has a high credit utilization ratio), the banks get nervous and think Leighton may not be able to pay his bills.  So it’s important that Leighton doesn’t max out his credit card and keeps a low utilization ratio.

Reducing Your Credit Line Could Lower Your Credit Score

If Leighton lowers his available credit it could decrease his credit score because it increases his utilization ratio.  

For example, let’s say Leighton has a $10,000 credit limit on his Chase Sapphire Preferred with a reported balance of $1,000.  This means that his utilization ratio is 10% ($1,000 reported balance ÷ $10,000 total credit line).

If Leighton reduces his credit limit to $5,000 before he applies for the Chase Freedom, his utilization ratio increases to 20% ($1,000 reported balance ÷ $5,000 total credit line).

So lowering his credit limit on his only card could cause Leighton’s credit score to drop significantly.

Does Lowering Your Credit Limit Help You Get Approved For More Credit Cards

Leighton’s Credit Score Could Drop Significantly If His Utilization Ratio Increases

If someone is using more of their available credit, it could be a sign that the person is hard-up and needs to use credit to make ends meet.

This credit score decrease is most likely to happen if Leighton has one or few cards.

If Leighton Has Lots of Cards

On the other hand, decreasing his credit line by $5,000 will likely have a very, very, small impact on his credit score if Leighton has 15 open credit cards!

So if he doesn’t want to call and trade credit lines, Leighton could reduce the credit line on one of his cards, and then apply for a different card from the same bank.

But Leighton shouldn’t do this unless he has a lot of open credit cards and outstanding credit available.

Note that some banks don’t usually let your transfer credit from 1 card to another card.

Bottom Line

Lowering his credit limit on a credit card from one bank could help Leighton get approved for more credit cards from that same bank.

But it could also lower Leighton’s credit score, especially if he has very few credit cards.

A better approach could be to apply for the second card and move credit from his existing card to the new card.

That said, I use a mixture of both methods.  Sometimes I will just cancel a card without transferring the credit line and get approved for a new card.  And sometimes I will try to trade credit from one card to another cards.

That’s because I have over 15 open credit cards and a high amount of available credit, so losing a little bit of my credit line when I cancel doesn’t really impact my credit score.

But everyone’s situation is different.  So do what’s comfortable for you!

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24 responses to “Does Lowering Your Credit Limit Help You Get Approved For More Credit Cards?

  1. Thanks for sharing your current credit card handle. When I first came to your site I had 3 credit cards, very good credit but I was really ignorant to the potential. Now it’s 18 active. My wife has 16 active. It is a lot of work and not everyone wants to be that organized nor is everyone willing to pay in full each month to make this work….but you need to be in both instances. Nearly all the credit cards we’ve been approved for have come from your links. This is a thank you for all the time and effort you put in to help people. It does not and has never gone unnoticed by us. May you and Emily have another great year of travels. Thank you for everything my friend!

  2. Excellent info! What phone number do you call to transfer credit with Chase?

  3. Satej Ankolekar

    I love your website, I used to only use $0 annual fee credit cards before but after reading your posts, I started looking for $0 annual fee and one time sign up bonuses! Right now I have 32 Credit cards from almost all banks in the country, and a score of 757 ! Thank you Mr.dubash! you are the best

  4. I was just considering this last night, I’m glad you wrote an article about this! One thing that is applicable to me is loans. As a graduate student I am taking out significant amount of loans (basically living/paying tuition with loans). I’m sure this negatively impact me but how much? And what could be done to improve my chances of opening new cards?

  5. “Note that some banks don’t usually let your transfer credit from 1 card to another card.”

    Do you have a complete list of banks that allow you to transfer credit from one card to another? Or, oppositely, banks that absolutely WILL NOT transfer credit?

  6. Chase is the only bank that allows credit line transfers. Bank of America and Barclays are definite No’s and it’s best to close a card or lower a limit a few days before a new application. AmEx almost never transfers CL’s.

  7. AMEX lets you move credit around but you have to call. You can only move credit from credit cards that have been opened for at least 12 months. They also ask for your household income before they process your request. At the end of the call, they tell you to wait for a letter in the mail letting you know if you were approved for the transfer or not.

    As for Chase, just call the number on the back of any Chase credit card and they can do it for you instantly over the phone. You can also send them a secure message when you are logged into your Chase account.

  8. I’ve been able to transfer credit with Citi on my last apporama. I also learned that Chase has certain minimum credit limits for cards (as in, they have to extend you at least $5000 on the Marriott card in order to approve you for it). If you call in and they say approving you would put you over your bank limit, I’ve had luck calling back in and the new rep ignored that limit, rather than me canceling an existing card I didn’t want to cancel. So when it comes to moving credit (with Chase at least), you can’t move FROM a card if it would put you below that cards minimum limit.

  9. Robert – None of the bloggers, TPG, View From the Wing… will give you the exact number.

  10. I have around 20 open credit cards with about 7 banks. US Bank and Barclays are the most difficult to deal with. I recently called US Bank to transfer credit from one card to another. The agent said she couldn’t do this, she could only lower the credit line on Card A and independently process my request for an increase on Card B. I reluctantly said OK. I’m not anywhere near my credit line on Card B (10-15% most months), but I expect to be much closer quite soon. Result: a denial of the increase, sent later via US Mail, and possibly a hard pull. So, I wouldn’t recommend this approach at least with US Bank.

  11. Grant, I assume Amex’s request for household income (also used by US Bank) means they will do a hard pull before approving a CL increase. Which most of us will try to avoid.

  12. Do you know which banks allow you to move credit to open a new account?

  13. Nice info. I was planning on applying for the Citi HHhonors card and this is certainly helpful.

  14. Thanks for your continuing great advice. If more people realized that a terrific credit score not only gets you lower interest rates on mortgages and car loans but also gives you entree to a variety of credit cards with fabulous sign-up bonuses, we’d have a nation of more fiscally disciplined consumers. A high FICO score has helped many of us take dream vacations. Keep up the good work!

  15. Your tips have greatly helped me organize my travels and applying for two more credit cards. Here in the Philippines Cathay Pacific- Amex card makes you a member of the MarcoPolo Lounge which is a mre exciting way of waiting for your plane rather than be among hordes of non- members. My new Citibank Mileage card gives me the change of having auto debit payments since I am also a Citibank depositor. This lessens the hassle of paying with checks every month. Now my current Citibank gold will be used primarily for my business expenses and utilities-electricity, water, telephone bills. Lessens confusion to my accountant. Now I have to open a new account with Citibank to make payments on auto debit. This lessens trips and checks to banks. When you are getting older or busier this arrangement saves a lot of effort, time, and STRESS.

  16. One thing to note:

    My wife and I each have 25 open credit cards and have “excellent” credit per CreditKarma. We usually have around 2% to 3% utilization. When we went away for a month recently I prepaid all our cards that we would use so I wouldn’t need to bother about missing a payment. The next month I saw a marked decrease in our credit scores, with the utilization component sitting at 0% (actually they were negative but showed up as zero)- which resulted in a very marked decrease in our credit scores which lasted about a month! This was only temporary and now it is back up again. Seemed odd to me.

  17. I just closed my Barclay US airways credit card and they let me move my full credit limit to my Frontier Card. Now Im thinking I should have just cancelled it as I have $21,000.00 on that one card and would like to apply for several more Barclay cards in the future. Should I request to lower it to 10,000 or maybe just dump Frontier as well?

    • @Kent C – Thanks for sharing your story! You’ve got more open cards than us! And thank you very much for using our links to apply for the cards. Wishing you and your family all the best for a wonderful Holiday season and new year!

      @Satej Ankolekar – That’s a lot of cards!

      @Huy – Student loans will also help your overall credit profile since it shows that you have credit from different sources. I applied for cards when I was in grad school and got approved!

      @TRW – Usually Citi and Barclays won’t let you proactively transfer credit, but their telephone reps sometimes (though not all the time) suggest transferring credit to get you approved. Bank of America & US Bank will usually not transfer credit and AMEX may let you transfer if you have the card for more than 1 year.

      @Jordan – It depends. Chase appears to be the most flexible. Citi’s telephone reps (& sometimes’s Barclays) also suggest transferring credit to get approved for a new card.

      @Armi Martinez – I sign up all my cards on auto-debit to avoid missing payments. It is very easy to miss payments when you have lots of cards!

      @Frank – For some strange reason a very low utilization rate seems to increase credit scores. I’ve experienced the same issue where a utilization ratio of ~5% helped my score more than paying it off in full!

      @Jeff – You could lower it or hope that they’d give you the opportunity to transfer credit when you apply for a card the next time.

  18. @darius- a utilization ratio of ~5% has nothing to do with wether you pay off your balance in full every month (in your comment to @Frank). I have heard anecdotally that carrying a balance month to month can make you look more attractive to certain banks, as the bank will get finance charges from you. If you are going to play that game than you need to be careful, the bank will finance the whole amount of your balance even if you pay off 99% before your due date. The best thing to do is charge a small amount over your minimum payment ~$36, pay the $35 minimum payment and then the finance charge will be very small but the banks will see you as carrying balance. I wouldn’t do it, but some do. I have seen people argue that 0% utilization is better and others that 1-5% utilization is better. I don’t know the answer.

  19. i read on blogs that if one did spend more then half of his credit then pay of some right away.
    Q. is there a given day in the month that its gets reported to the credit bureau or is it only once your statment closes? in other im asking if i pay 3 days before my closing date will that help or it may of already been reported?

  20. I had 4 personal and 2 business Citi cards and could not get approved for anymore a few months ago. So I canceled 1 personal and 1 business, since there were also annual fees coming due, and figured I was maxed on today credit they would give, as well. I just did an AOR today and was approved for lots of cards including a Citi personal card! So proves to me you do need to lower your overall credit line, or cancel a card sometimes, to get approved for more from a bank.

  21. Dear Darious, over the past 2 yrs. i have been a follower of yours.
    I am happy to wish you a good new year, 2014.
    I have being able to get approved thru your site with Chase card and so on. Very informative in just about every area related to travel, rewards, credit, etc
    I believe all above is true but if your income is high enough and you have the right score with lower credit utilization, you shouldn’t have any problem, assuming you don’t have so many inquiries out there. Barclays, Chase have being able to transfer my lines anything without a problem and to get approved by Citi instantly 2 cards back to back and with high credit limits. Agains thanks for all you have done for our benefit.

  22. I get a bit confused with new inquiries. On credit karma I have a C with 6 inquiries, but if I open up more and get to 6-8 it will be a D rating and beyond that an F. If I have A and B on the other areas does it matter much if I open up more credit cards. My score is above 760 and I have maybe 10 cards. Any advice?