How Asking For A Credit Limit Increase Can Help Your Credit Score
Dear Liz: Does asking for a credit limit increase on a credit card affect your credit score in any way?
Reply: Such a request may result in a serious investigation of your credit reports, which may slightly alter your scores. If you get the raise, however, it usually has a positive effect on your scores.
Credit scoring formulas, including those developed by FICO and VantageScore, are sensitive to the amount of available credit you use. This is especially true on revolving accounts, like credit cards. The less available credit you use, the better: 30% or less is good, 20% or less is better, 10% or less is better.
It’s important to keep your balances low compared to your limits, even if you pay off those balances in full each month (as you should). The balances reported to the credit bureaus and used to calculate your scores are usually your statement balances. If these amounts are high compared to your credit limits, your scores will likely suffer, even if you pay off that balance immediately.
There are a number of ways people keep their credit usage low. They can split their purchases across multiple cards, make multiple payments per month (usually one right before the statement closing date and another before the due date), or request credit limit increases. Each of these actions can help increase the gap between the credit they use and their available credit, which can improve their scores.
Prevent a legacy from harming
Dear Liz: I am leaving a bequest in my will to a good friend. He receives government benefits, including disability benefits, Supplemental Security Income, and Medi-Cal (California’s version of Medicaid). I’m starting to worry that if he inherits the money, it might spoil him more than help him. Is there a way to leave a bequest to someone like my friend without compromising the various benefits they are currently receiving?
Reply: You will need an attorney with experience in “special needs trusts” to help you put language into your estate plan that can help protect that money and protect your friend’s benefits.
Your concern is valid because a direct inheritance could cause him to lose income and health coverage. SSI and Medi-Cal are both “means tested” programs that require people to have less than $ 2,000 in assets. Too often, well-meaning friends and relatives leave direct legacies that have the unintended consequence of separating recipients from the vital services they need to survive.
Sort the benefits of the ex
Dear Liz: I am 68 years old and I intend to delay the start of social security until age 70. I was married for 15 years before an amicable divorce 15 years ago. My ex just turned 60 and remains single but could possibly get married in the future. Is she entitled to survivor benefits? If so, what can I do to make sure that she can effectively request this benefit? We have already looked at his option to pay my benefits upon my death, but our benefits are practically at the same levels so this option does not appear to be applicable.
Reply: You seem to have confused divorced survivor benefits and divorced spouse benefits. She may be entitled to both, but the only way to help her get survivor benefits is to die. It’s great that you’re still friends, but maybe that takes friendship a bit too far.
Your ex is too young to apply for a Divorced Spouse’s Benefit, which is only available at age 62. his own full retirement age. If she was born in 1959, her full retirement age is 66 years and 10 months.
In addition, she would only get a divorced spouse’s benefit if it is greater than her own benefit. If your benefits are “virtually identical”, they probably are not.
If you were to stop tomorrow, however, she would be eligible to receive a Divorced Survivor Benefit and postpone receiving hers. Survivor benefits are available from age 60, or age 50 if the survivor is disabled, or at any age if the survivor is looking after the child of the deceased who is under 16. Your ex could also get married at age 60 or older without losing their survivor benefit. People who receive a divorced spouse’s benefit, on the other hand, lose that benefit if they remarry.
Liz Weston, Certified Financial Planner®, is Personal Finance Columnist for NerdWallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.