Learning how to increase credit limits can be beneficial if you know how to manage your finances.
If you’ve been using one or more credit cards responsibly, then you may have considered requesting a credit limit increase, sometimes called a credit line increase, in the event that you may need more access to credit in the future.
Now, there are no guarantees that a credit card company will increase your credit line. But there are some steps you can take, or continue taking, to help your chances of qualifying for a higher limit.
- Credit card companies may increase your credit limit automatically or wait for a request from you.
- Credit increases can be beneficial, but they should be handled with caution.
- Limit increase approvals are determined by many factors, including your credit score, debt-to-income ratio, length of credit, and more.
Understanding your credit card limit
Every credit card has a predetermined amount you can spend on it, called your credit limit.
There are a few factors that go into determining this amount, including your credit score, gross annual income, length of credit history, repayment history, and how many open credit accounts you currently have.
While these are the general factors considered for all credit applications, every credit card company is different, and their underwriting process will vary.
Does having a higher credit limit help my credit score?
A higher credit limit can help boost your credit score if you are a responsible cardholder; however, if you’re still trying to figure out how to manage your finances or tend to overspend, it can negatively impact it.
One of the main factors affecting your credit score is your credit utilization or the amount of available credit that you’re using.
For example, if you have a $5,000 credit limit and you’re holding a balance of $2,500 on your card, your credit utilization is 50%. Ideally, you should keep this number below 30% per card to avoid a negative impact on your score.
Increasing your credit limit is one way to decrease your credit utilization percentage. If your limit goes up to $7,500 with the same $2,500 balance, your utilization decreases to around 33%, which can significantly help your overall credit.
What are the disadvantages of a higher credit limit?
While having access to more credit may seem like a good thing, it can cause problems if you are unable to manage the higher spending limit. Before requesting a limit increase, consider your reasoning for wanting it.
Do you want to lower your utilization or have increased flexibility in case of emergencies? If so, it may be a good option. However, if you find that you’re always needing to tap into your credit for one reason or another, increasing your limit may not be a great option.
Higher credit limits can put you into serious debt very quickly, especially if you’re unable to pay off your balance every month. The higher your balance, the more interest you pay and the longer it will take to pay off your debt.
Poorly managed credit can become a trap that can take years or even decades to pay off.
What to consider before requesting a credit limit increase
Before contacting your credit card company to request a limit increase, be sure to consider the following.
When to ask – When it comes to requesting a limit increase, your timing is important, and asking at the right time can increase your chances of approval. Waiting until you’ve established a good track record of repayment, when you’ve recently received a pay raise, or if you’ve paid off other cards will put you in a better position for approval.
However, if you’ve recently applied for another card, lost income, or missed payments, you’re better off waiting before asking for a limit increase.
The impact on your credit score – Many credit card companies run a hard inquiry on your credit whenever you request a credit increase, which could temporarily lower your score.
The more inquiries you receive, the greater the impact on your score, which can undo any hard work you’ve accomplished if you’re trying to fix or raise your overall credit.
How to increase credit limit in four simple steps
If you’ve reviewed your finances and determined a credit limit increase is right for you, there are four options you can utilize to get a higher limit.
Step 1: Apply for a new credit card – If you have a solid credit score and you’ve made on-time payments on any existing accounts, you may be in a good position to apply for a new credit card with a higher limit.
Even if you choose a card with a similar limit as your current one, the amount of overall available credit you have goes up.
Many people use this process as a form of debt consolidation, opening a new card with a higher limit and lower APR and transferring their existing balance to it. Not only will this lower your monthly payments, but it’s an excellent way to pay off high-interest cards.
Step 2: Request a credit increase online – Many card companies make it easy for their customers to request a credit increase through their online accounts. For this method, you simply sign in to your card account and submit a credit increase request.
You will most likely have to provide updated information, including income, to show that you have adequate financial security to cover the additional credit.
Step 3: Call your credit card company – If you prefer to speak to a person, you can call the customer service number on the back of your card to ask if you’re eligible for a credit increase.
A customer service representative may ask you additional questions, evaluate your payment history, and run a credit check before providing an answer.
Step 4: Monitor your credit limit – Some card companies offer periodic automatic limit increases to their customers. They will often do this for established customers who exhibit excellent credit management, including on-time payments and low utilization.
Final thoughts on increasing credit limit
Knowing how to increase your credit limit can help you if you’re trying to lower your utilization percentage or create a larger cushion for emergencies.
However, it can also get you into deeper debt if you struggle to manage your finances.
Considering the pros and cons a higher credit limit offers before making a request will ensure you make the right decision and help keep your finances on track.
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As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.
If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a free consultation call with one of our certified Debt Consultants, who can provide personalized advice tailored to your specific needs.
By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future.
Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.
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