This Lesser-Known Way to Boost Your Credit Score Could Backfire on You

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The average consumer credit score in 2023 was 715, says Experian. But if you're gearing up to apply for a large loan, like a mortgage, then you may be eager to get your score up beyond that point.

Now there are different steps you can take to boost your credit score, such as making credit card payments on time and correcting errors on your credit report. You can also boost your credit score by lowering your credit utilization ratio.

Your credit utilization ratio measures the amount of available revolving credit you're using at once. Generally speaking, a ratio above 30% can hurt your credit score, while a ratio of 30% or less is favorable. But the lower your credit utilization ratio is, the more your score has the potential to improve.

One way to lower your credit utilization ratio is to pay down a chunk of your existing credit card debt. But that may be easier said than done.

However, there's another tactic you can employ to bring your credit utilization ratio down. It's an approach, however, that carries some risk.

An easy way to potentially help your credit score

If your total credit limit across your different cards is $10,000 and you have a $4,000 outstanding balance, that gives you a credit utilization ratio of 40%, which isn't great. Pay off half your balance, and that ratio drops to 20%, putting you in much better shape.

But coming up with $2,000 can be difficult. So thankfully, there's another way to lower your credit utilization ratio -- ask for an increase to your credit limit.

Often, credit card issuers will raise your spending limit if you can show proof of a higher income. Or if you've simply been an account holder in good standing for a while, you call and ask for it, and they'll often comply.

So going back to our example, let's say you owe $4,000 on a $10,000 credit limit. If you're able to get that limit raised to $14,000, suddenly, instead of 40% utilization, you're at about 29% utilization. That has the potential to help your credit score.

However -- and this is really important -- this tactic only works if you raise your credit limit, but don't spend more once your higher limit is in place. If you increase your credit limit from $10,000 to $14,000 but then raise your balance from $4,000 to $5,500, you're still going to be at about 40% utilization. Only now you have a larger balance to pay off -- and a balance that's apt to start accruing more interest by the day.

Paying down debt is your best bet all around

If you owe money on your credit cards, paying down your balances is one of the smartest financial moves you can make. Not only can it help boost your credit score, but it can save you a lot of money on interest.

If you're eager to see your credit score improve quickly, then getting a credit limit increase may be a more efficient way to go about the process. But in that case, pledge not to add to your existing balances. Otherwise, you risk not only not raising your credit score, but digging yourself deeper into debt.

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