February 1, 2013 2:47 pm
What are the benefits of increasing the credit limit.
What is the impact of higher credit limit on CIBIL score.
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Dear Shashi, you are an ideal customer a bank w’d like to have as it’s borrower. Please do not accept the limit increase if you do not need so. Please apply for home loan. My preferred choice for home loan ‘ll be SBI. Even within SBI, my product choice ‘ll be SBI Max Gain.
Thanks @Krishna for your prompt response.
No, it will not have any impact on your home loan processing. And more over as you said you have made all the payments regularly and not used more that 20% limit, and bank’s proposal to increase your credit limit, all these are good signs of your financial stability.
Now you can even bargain the home loan interest rate with the bank. Remember banks are desperate need for cash inflows because of HUGE pile of NPA’s on there balance sheets.
If you ask for it, there may be a chance that bank will even reduce your interest rate by 0.15%-0.25%.
Krishna Kishore Appala.
Thanks @Krishan, for your response.
I have never missed any payment till date. Have paid full payment before due date and nearly use 15%~20% of my limit as of now. As my payment is on time, bank ready to increase my limit by 100 %.
As i am planning for home loan, so would like to know if there would be any impact of higher credit limit during home loan processing.
It matter some times, lets say your salary is 50k and you have a credit card limit of 2 Lakhs.
Every month you are using 2 Lakhs limit to the full, and also you are making the complete payments on time, (lets say every month you recieve 2L from other sources).
But from the bank perspective, your steady income is 50k and you are leveraging very high on your standard of living. And that leverage is a risk for the bank. And the same will be reported to CIBIL along with your correct and timely payments. Since there is a factor of risk associated to the bank, they consider 100% usage of limit as a negative scenario.
Now you can ask another question : What if I use the same 2L from two different banks credit cards, with each card limit as 2L. In that case you are using only 50% limit from each card and still manage to get your 2 Lakhs.
In the above case, from your point of view, you are still taking the leverage position, But from bank perspective you have reduced you debt exposure to (2:1) previously from (4:1), which is good sign and a low risk to the the bank.
Krishna Kishore Appala
Thanks. I find this credit score business bizarre and at times amusing! I thank God that I have stayed away from debt thus far.
Its good to see you haven’t stuck in this debt mafia ( Credit card Mafia name really fits them) 🙂
I myself was stuck in these long back but some how managed to come back and immediately canceled by CC. 😀
There will not be much impact on the CIBIL score due to your credit limit.
But all that matter is your % of limit that you use on monthly basis. If you prone to use nearly 90%-100% of your credit limit, it directly reflects your hunger and thrust for money. This will have an impact on your credit score. Nevertheless if you have a high credit limit and a monthly usage of not more than 50%-60%, and a perfect timely payment will also helps to increase your CIBIL scrore.
Hope that clarifies your doubt.
A question due to curiosity (I don’t have any credit cards now and don’t intend to get them).
Why should the % of credit limit used each month matter if one pays all dues before the last date?
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