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Welcome to another installment of the Credit Q&A Series on the Credit Karma Blog!

As we shared with you last time Ken Lin our founder and CEO has been making weekly appearances on the Ed Shultz Talk Radio Show. Ken brings credit and finance knowledge to Ed’s listeners.

Lately Ken’s been answering questions from the show’s listeners. Today’s question is all about credit limit increases.

Listener Question

“Is there a severe impact on your credit score if you get a healthy credit limit increase on one of your credit cards and then you subsequently request to close several smaller cards?”

Ken’s Answer

The answer to this question can vary depending on specific situations, but there are some general rules you should keep in mind. Here are four different tips to think about if you find yourself in a similar situation.

1. Credit limit increases are good. Receiving a limit increase can help lower your credit utilization rate. If you have $1000 of debt and your limit is only $2000 you are at 50 percent of your utilization. But if you can add another $2000 to your limit you’ll be at 25 percent. Credit companies like this since it appears you are not the edge of using too much of your available credit.
2. Don’t let a higher limit lead to higher debt. Just because you were given an increased credit limit shouldn’t mean you have an excuse to spend more and increase your debt.
3. Closing too many accounts at once can negatively affect your score. Consumers should always keep their credit utilization to less than 30 percent. If you close too many accounts at once the utilization rate you worked to lower by increasing you limit could go right back up.
4. If you need to close an account, chose wisely. Another important part of your credit score is your credit history. For example if you have had a credit card that you opened when you were 18 and you are now 30, that card has 12 years of credit history. If you’ve consistently been responsible with that card, it shows lenders you have been a good customer, not missing payments or defaulting on your debt. You probably don’t need a ton of cards so it is ok to close some, but be careful not to close the one with a longest history.

Still not sure how this type of situation could impact your credit score? Sign up for Credit Karma and check out our credit simulator. This lets you see how various financial actions could affect your credit score over time.

Amy Leone is the Public Relations Coordinator at Credit Karma. Before joining the team in June 2012 she spent most of her career as a TV news producer. When she’s not helping promote Credit Karma on a variety of media outlets, she’s probably out running or exploring her new state of California.

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