I just recently started attacking my credit card debt, paying off cards. As I’ve paid off each balance two of the cards have immediately raised my limit to double or even 10x(!) my previous limit.
Which surprised me, the credit card companies think I’m making substantially less than I actually am.
I don’t really understand how it all works, as I feel like my total credit card debt is higher than I’d like, but my credit score got way better since now my balance looks way lower as a percentage of my total credit.
The first time I ever failed to pay off my card in full on a given month, they increased my credit limit significantly. That seemed a bit perverse to me: Hey, we see you're struggling, let us make sure you have enough rope to hang yourself with.
Prior to that I'd only ever increase my limit when my monthly spend would approach it, usually a holiday season.
Remember that payday loans are extremely profitable. Fucking with poor people and making them pay twice as much as everyone else is basically how most American businesses make their best profits.
I feel this might have been a coincidence, but at the end of the day every financial product is essentially a bet the banks make against you so they can get paid the interest.
Cash is worth more to me than what the credit card company thinks about me. What a bizarre take. Carrying balances is a positive thing if you pay on time every month.
It’s actually a myth that carrying a balance does anything to your credit score. Low utilization of your credit limit and long history of the credit line, combined with history of on time payments is what matters.
You get a higher credit limit if they think your income is higher.
Also, parent poster is likely paying interest, which is the worst thing you can do on a credit card.
And yet I regularly have credit karma and others go up-down if I pay off before or after the company reports "average monthly balance". Its usually by a large amount too, 15-30 points.
Utilization has the lowest impact on your score. By your reasoning, homeowners with a mortgage should have a terrible credit score, when in fact it’s usually the opposite.
Utilization is 30% of your credit score making the 2nd largest single factor, behind only payment history (35%). That said utilization only counts revolving credit sources. That means installment loans like home and auto loans are not part of that particular factor.
FWIW "paying off a month's balance due" is different than "paying off my credit card debt" to me. The latter implies you're carrying an already due balance to a future term and adding the interest associated with that.
> Carrying balances is a positive thing if you pay on time every month.
This is absolutely never true.
Paying off a card every month is not "carrying a balance". Not paying off a card every month results in paying 15%+ rates in interest on the balance carried and actively lowers your credit score as long as you do it.
If you are carrying balances in the belief that it is a sound financial decision: stop immediately and take a moment to learn more before you make other poor financial decisions.
If you’re talking about my statement, I’ve been carrying a balance. Dumb reasons and I make enough that I’m getting my head above water now. I paid off the balance on a few of the cards and they almost instantly upped my credit limit by thousands of dollars.
> Carrying balances is a positive thing if you pay on time every month.
It improves your score, for sure. Your credit score is an assessment of your value as a customer. A customer who pays off their balance every month before incurring any interest is lower value than a customer who runs a balance and makes payments. The bank wants more people like that.
What impacts your score (in this axis) is utilization of revolving credit: credit used over credit available. Driving the numerator to zero will increase your credit score. Increasing the denominator will also increase your credit score. There is no situation where—all else being equal—increasing the numerator will increase your credit score.
> Your credit score is an assessment of your value as a customer.
No, your credit score is an assessment of your trustworthiness to a creditor, and the expectation that you will pay off any balances in full. Individuals with high credit scores are not generally directly valuable customers as they carry little revolving debt and are given low interest rates for mortgages and car loans. They accrue and use significant amounts of credit card rewards, which further cut into your profits. However, they (generally) make more and larger purchases so you make more money on merchant fees than you do with other cohorts.
Which surprised me, the credit card companies think I’m making substantially less than I actually am.
I don’t really understand how it all works, as I feel like my total credit card debt is higher than I’d like, but my credit score got way better since now my balance looks way lower as a percentage of my total credit.