Should I accept PenFed's preapproved offer to raise limit?

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oneleaf
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Should I accept PenFed's preapproved offer to raise limit?

Post by oneleaf » Thu Jul 22, 2010 11:20 am

I use the PenFed Cash Back Visa. When I login, I see a preapproved increase of approximately double my credit limit. I inquired and it says PenFed will not do a hard check on my credit report since it is preapproved.

Is it generally a good idea to take preapproved offers like this even if you do not foresee needing the credit increase? Does it help your credit score at all? Does it hurt?

pochax
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Post by pochax » Thu Jul 22, 2010 11:37 am

so long as there is no hard pull on your credit score, this should ultimately help your FICO score by increasing the denominator in the debt utilization calculation that contributes to the FICO score. higher credit limit with no change or lower credit usage = lower debt utilization = higher FICO score.

sjb19
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Post by sjb19 » Thu Jul 22, 2010 11:42 am

I have heard conflicting information on this from seemingly reputable sources. Some say the increased amount of available credit will lower your score, others say the decreased utilization rate will help your score.

The actual answer might be that it varies from person to person as everyone's debt picture is slightly different in terms of amount, type, etc.

pochax
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Post by pochax » Thu Jul 22, 2010 11:53 am

here is a good link to educate oneself on what makes up your FICO score:
http://www.creditunions.com/article.aspx?articleid=2106

i don't think the increased amount of limit hurts your score so much as the REQUEST for the increase limit (assuming it is a hard pull on your credit in order to qualify for the increased limit).

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OAG
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Post by OAG » Thu Jul 22, 2010 2:48 pm

USAA actually allows you to "opt out" of any future automatic credit limit increases (on thier web site).

PENFED uses the "opt in" process. Personally, my PENFED card has NEVER had a balance that exceeded even 50% of the limit so I have never seen any harm in those increases and have routinely accepted them.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979.

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HueyLD
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Post by HueyLD » Thu Jul 22, 2010 2:55 pm

OAG wrote:PENFED uses the "opt in" process. Personally, my PENFED card has NEVER had a balance that exceeded even 50% of the limit so I have never seen any harm in those increases and have routinely accepted them.
Did they do a hard pull on your credit history?

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oneleaf
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Post by oneleaf » Thu Jul 22, 2010 3:59 pm

damn, i just kinda got screwed with this process.

i went ahead and went through the process.

And halfway through, i had a hiccup and was not sure what to do. So I withdrew the application and called them. The person continued the application process over the phone for me, but due to some misunderstanding, did a hard pull on my credit.

Now, doing a little research, a hard pull is no big deal if you do not need to apply for a mortgage for the next 6 months. It's a temporary 5 point drop. Is this accurate?

livesoft
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Post by livesoft » Thu Jul 22, 2010 4:06 pm

LOL! 5 point drop? Big whoop. Who cares?

I'm serious. Why would you even care? Even if you were getting mortgage or blowing your nose. Does it even matter? Seriously?

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oneleaf
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Post by oneleaf » Thu Jul 22, 2010 4:13 pm

livesoft wrote:LOL! 5 point drop? Big whoop. Who cares?

I'm serious. Why would you even care? Even if you were getting mortgage or blowing your nose. Does it even matter? Seriously?
Hehe, while I appreciate your honest reaction, this is a serious question. I admit I am bombarded by people all around me who safeguard their credit score like their lives depend on them. They avoid hard inquiries like the plague.

Now, if 5 points is LOL-worthy, and this hard-inquiry scare is nothing but overhyped madness, then I'm glad you pointed it out to me. I honestly have never spent much time learning about the mechanics of FICO scores and the impact it has on your loan applications. I pay all my bills on time and act responsibly and rarely apply for new loans or credit limit increases.

infecto
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Post by infecto » Thu Jul 22, 2010 4:22 pm

Nothing to worry about imo. People worry too much about their credit score. It might ding it but its only temporary.

Spirit Rider
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Post by Spirit Rider » Thu Jul 22, 2010 5:36 pm

Increased credit limit can only help your FICO score. Per Fair Isaac, two components of credit limit affect your score.

First, utilization (per card and aggregate). Increased credit limit will reduce your aggregate utilization. This is assuming that the credit issuer "reports" the credit limit and not the maximum limit utilized (this is a problem with Visa Signature cards).

Second, Increased credit limit will increase the number of revolving lines with higher limits (What these limits are, is not disclosed. This is like social proof in mate selection. If one creditor likes you, another should too.

The only time "too much" avalable credit hurts is when applying for credit where the issuers suplemental scoring models determine that excess available credit is a greater risk than they wish. This is because issuers have access to not only your credit profile, but your income and in the case of financial reviews your assets.

Income information is not available to calculate your credit score. So available credit will not affect your credit score. It could affect your ability to get actual credit in the future.

In past the financial institutions simply asked you to close the excess credit lines they were uncomfortable with. However, in this upside down credit market, I don't think anybody knows.

Over the last couple of years I have just hunkered down and not raised any red flags. I haven't asked for any credit limit increases, and just accepted the credit limit decrease. My philosophy in this is don't talk to a live person at credit issuers if you don't have to.

My take would be, if your total revolving credit is well less than your annual income and you can do this online, go for it.

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Post by LadyGeek » Thu Jul 22, 2010 6:26 pm

pochax wrote:here is a good link to educate oneself on what makes up your FICO score:
http://www.creditunions.com/article.aspx?articleid=2106

i don't think the increased amount of limit hurts your score so much as the REQUEST for the increase limit (assuming it is a hard pull on your credit in order to qualify for the increased limit).
Do you want to stop receiving credit card offers? The credit reporting agencies give your info to the credit card issuers. Follow the article link to: OptOutPrescreen.com
FAQ wrote:OptOutPrescreen.com is a centralized service to accept and process requests from consumers to "Opt-In" or “Opt-Out” of firm offers of credit or insurance. OptOutPrescreen.com is a joint venture among Equifax Information Services, LLC, Experian Information Solutions, Inc., Innovis Data Solutions, Inc., and TransUnion, LLC (collectively the "Consumer Credit Reporting Companies").

Under the Fair Credit Reporting Act (FCRA), Equifax, Experian, Innovis, and TransUnion, are permitted to include your name on lists used by creditors or insurers to make firm offers of credit or insurance. The FCRA also allows you the ability to "Opt-Out", which prevents Consumer Credit Reporting Companies from providing your credit file information for firm offers of credit or insurance that are not initiated by you.
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northend
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Post by northend » Thu Jul 22, 2010 6:28 pm

It's my understanding is that it would help your credit score.

However some Clark Howard listeners have reported that they were denied a loan until they reduced amount of available credit.

livesoft
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Post by livesoft » Thu Jul 22, 2010 7:38 pm

Folks may wish to check out the free site www.creditkarma.com for analysis of their credit and estimates of the effects of your actions.

It really is free. google it for reviews. If you register (free), it will do a soft inquiry of your transunion credit report (free) and estimate your score. Then you can do stuff like (a) add a new credit card, (b) pay off balances, (c) default on a loan, (d) increase credit limit on an existing card, ... and see what it estimates your new score might be.

For example, I see that if I add 1 hard inquiry that my simulated score drops by 1 point.

FinanceGeek
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Post by FinanceGeek » Thu Jul 22, 2010 9:33 pm

Some auto/home insurance companies pull your credit report annually, typically at policy renewal time.

At least with my insurance company, you can't get the lowest premium class with a hard pull within the last 6 months on your record. So lesson I learned the hard way is to only apply for credit in the first 6 months following your policy renewal.

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OAG
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Post by OAG » Fri Jul 23, 2010 7:20 am

HueyLD wrote:
OAG wrote:PENFED uses the "opt in" process. Personally, my PENFED card has NEVER had a balance that exceeded even 50% of the limit so I have never seen any harm in those increases and have routinely accepted them.
Did they do a hard pull on your credit history?
Not to my knowledge, but then I never check my credit score. A phone call to the 800 # would answer that.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979.

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