How to increase your credit limit

How to Increase Your Credit Limit: A Step-by-Step Guide

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You might have noticed when a credit card issuer has automatically increased your limit. You’ve probably received an email or notification when logging in about your new limit. But what do you do if they haven’t and you want a higher limit on your credit card? There are ways you can make this happen.

You might wonder how your credit card limit stacks up compared to others. The average credit limit across credit cards for Americans is $22,751 according to data from Experian.

Before going about asking for a credit line increase ask yourself why you’re wanting it. A bigger limit can increase your spending power which can come in handy in many cases. It may also lower your credit utilization which is your credit card balance against your total limit. But it shouldn’t be a green light to go spend money that you don’t have. Let’s look at how you can increase your limit on your credit card below.

How To Get a Higher Limit on Your Credit Card

There are a few ways that you can request increasing your limit on your credit card. You can make a request to your credit card issuer, wait for an automatic credit increase or apply for a new credit card. Let’s look closer at these options and what you should know to decide which one to use.

Request a Credit Limit Increase

The most direct method is to ask your credit card issuer for a credit limit increase. You should know that if you do this, it’s likely that you will get a hard inquiry on your credit report. When you applied for the credit card initially, this was also the result.

Hard inquiries will lower your credit score slightly. Your FICO credit score will be affected for a year. Hard inquiries disappear from your credit report after two years. Make sure that you’re ok with this negative effect and the benefit of having a higher credit limit outweighs it before taking action.

Your issuer will make one of the following decisions when you submit your request:

  1. Approve your increase request
  2. Counter with a lower increase amount
  3. Decline you increase request

If you’re denied, you’ll generally need to wait for a while before making another attempt. Continue to use your card and ensure that you are making your payments on time til then.

There are generally two ways that you can request a credit limit increase from your issuer described below:

How to Request a Credit Limit Increase Online

The first way is to make your request for a higher credit limit online. This requires you to sign in to your account on a computer. With some issuers, you might be able to do this directly through their mobile app. Find the option for a credit line increase and submit your request.

Sometimes you have to update your income information when submitting the request. Issuers will take this information into consideration when evaluating your request. Greater financial security is indicated through a higher income from the issuer’s perspective.

You might be approved or denied immediately after making your request, depending on your issuer. Others may take several days to get back to you, particularly if you’re asking for a large increase. They will notify you of their decision through a mailed letter or online message.

How to Request a Credit Limit Increase Over the Phone

You can also call your credit card issuer and ask them about your eligibility for a higher limit. Find the phone number located on the back of your card and talk to a customer service representative. You might be asked questions or verification information by the agent such as:

  • Current physical address and Social Security Number
  • Current employment status
  • Total gross income (monthly and annual)
  • Monthly mortgage or rent payments
  • The amount of credit limit increase requested

Similar to if you make your request online, you might get your decision right away or have to wait for a letter or online notification.

What to do if Your Request is Declined

There’s a number of reasons why you might be denied your request. Your issuer must provide you with the reason(s) for the decline. Some of the common reasons for a declined credit limit increase request are:

  • Your account might be too new
  • The last change in your credit limit was not too long ago
  • The type of account that you have doesn’t allow for credit limit increases; i.e. secured credit cards
  • Negative information on your credit history

If you were denied due to something that was on your credit report, you should receive an adverse action letter. This explains the factors which lead to the decision. It may include recent delinquencies, high credit card balances, or missed payments.

The best thing to do if you weren’t approved at this time, is to take note of what the reason was. Work on improving those areas and try again after a few months.

Wait for Automatic Credit Limit Increases From Your Card Issuer

Credit card issuers will usually give credit line increases automatically to their cardholders after they’ve had it for a while. If you’ve been using your card responsibly, they may do it without you having to ask. Issuers usually do this as often as every six or 12 months. To increase your chances, you can:

  • Maintain a positive history by not paying late or causing returned payments
  • Use your card frequently; The issuer collects a fee each time it’s used so they are more likely to increase your limit if you are an active user

When an issuer automatically increases your credit limit, there’s no hard inquiry on your credit report involved. That’s the benefit of waiting for them to do it over requesting it.

Apply For New Credit

Sometimes it just makes sense to apply for a new credit instead of asking for a credit limit increase on an existing card. You can decide which issuer to go with and what type of card you want. If you apply for a new card that is with your current issuer, you might be able to reallocate part of the new credit line to the one that you originally wanted the increase on.

Your credit limit on the new card will depend on your credit score. You might not have a higher limit than what you already have available on your current one, but you’re still increasing your overall available credit.

Applying for a new card allows you the opportunity to take advantage of a benefit such as a one-time bonus. For example, an issuer might offer a $200 cash bonus when you spend at least $1000 on the card within three months. If you’ve been wanting a card with specific rewards such as travel benefits, a new card might be the right solution.

Why Does Your Credit Limit Matter?

Your credit limit is a representation of how much available credit you have. The amount that you owe against your credit limit is known as your credit utilization. For example, let’s say you have a credit card that has a limit of $2,000. You are carrying a balance of $200 on the credit card, which is 10 percent of your credit utilization.

The rule of thumb is to keep your credit utilization at 30 percent or lower. A high credit utilization ratio is generally an indicator of financial distress. It’s also a factor that’s taken into consideration towards your credit score.

Now let’s say you charge another $800 which jumps up your utilization to 50 percent. This could affect your credit score in a negative manner, which may be a consideration for asking for an increase in your credit limit or applying for a new credit card. If you increase your credit limit to $4,000, then your utilization drops to 25 percent.

Why Would You Want to Increase Your Credit Limit?

As you can see from the example above, increasing your credit limit could have a positive impact on your credit score.  That’s the main reason that you might consider asking for an increase. This only works if you keep your credit utilization low, however. If the increased limit creates a temptation to spend more, it could end up being a problem.

Know How Much More Credit You Need Before Requesting an Increase

If you decide to request a credit line increase, know beforehand how much more you want to ask for. A customer representative might be able to make a small increase without making a hard inquiry based on your account history. Larger increases will more than likely require a hard inquiry, however.

Don’t get greedy and ask for a huge increase because your issuer may see that as a red flag. That could, in turn, cause you to be denied. You’ll have to wait a few months afterward to submit another request.

Depending on your comfort level, you may start by asking for double your current limit. If your issuer declines that request without a counteroffer it usually means that the amount was too much based on your credit level and their credit policies. That will give you guidance when you ask next time to target a lower amount.

Probably the most important question to answer when deciding how much to ask for is “What amount can you responsibly handle?” If you’re revolving a balance regularly, then you might want to focus on paying the full amount instead. An increased credit line could lead to more charges like higher interest accrued, which isn’t a desirable result.

Your customer representative is prohibited from giving you advice on how much to ask for. If you’re looking for a rule of thumb, most issuers will increase a credit limit by 10 to 25 percent. That means if you currently have a $3,000 limit, you could see an additional $750.

Know Your Credit Score Before You Request an Increase

You should also know what your credit score is before making your increase request. Your chances of being approved are usually higher if it has improved since you opened your credit card.

Another reason that you should know it is that if your issuer does a hard inquiry to determine whether to approve your request. Whether you get approved or not, you’ll have an idea of how much it affects your credit score. If you were declined, then you might want to wait until your credit score is higher before submitting another request.

Know When to Ask for a Credit Limit Increase

Timing is everything when it comes to asking for a credit limit increase. There are both good and bad times to make your request. Knowing this will help improve your chances of success.

When is the Right Time to Request an Increase

One good time to ask for a credit line increase is when you’ve received a pay raise from work. Since income is a factor that issuers take into consideration, an increase in pay will create a more favorable impression.

If your credit score has increased or you have an overall healthy credit score, this is another opportune time to ask. A credit score that’s at or above 700 is usually a good score as a point of reference.

Your payment history is an indicator of how responsible you are with using credit. Making on-time payments that don’t bounce and paying your balance in full each month will leave a favorable impression. If you can’t pay your balance in full, you should at least keep your credit utilization as low as possible, preferably 30 percent or lower.

When is the Wrong Time to Request an Increase

All the opposite cases where it’s the right time to ask for an increase in your credit limit make up the wrong time to ask. If your income has dropped because of a reduction in pay or accepting a lower-paying job, it can reduce your chances of being approved.

When your credit isn’t in the best shape or you haven’t been consistent with your payments, you should wait. Consider it again once these aspects have improved.

Watch Out For Credit Limit Increase Fees

Some credit cards charge a fee to increase your credit limit. Some credit cards may charge you a predetermined fee or a percentage of the increase when you’re approved. In most cases, these types of cards are meant for those who have bad credit

If you have such a credit card, it’s best to work on improving your credit so that you can get a better credit card. Check and make sure you aren’t charged a fee before making your request in any case.

How Can a Credit Limit Increase Affect Your Credit Score?

Your credit score can be affected by an increase in your credit limit. Make sure you understand what can happen, particularly if you are making a request for the increase.

Potential Hard Inquiry

Asking for a credit limit increase from your issuer can initiate a hard inquiry on your credit score. A hard inquiry sometimes called a “hard pull”, requires your consent to occur. They are usually triggered when you apply for credit such as personal loans, credit cards, or auto loans.

It becomes a part of your credit report which anyone who reviews your credit will see for a certain amount of time. It usually shaves off around 5 points from your FICO credit score. Since a hard inquiry requires consent, you should know if your request for a credit limit increase will result in one.

Lower Utilization Rate

If you receive a higher credit limit, this will lower your utilization rate, provided you don’t start to carry a larger balance. Keeping your credit utilization under 30 percent can help improve your credit score.

For example, if you had a credit utilization rate of 40 percent, then you received a higher limit resulting in it decreasing to 20 percent. Or if you had a 30 percent credit utilization then it decreases to 15 percent after receiving an increase. In both cases, you may see your credit score improve slightly.

Final Word

Make sure that you have a good reason for wanting a credit limit increase before making a request to your issuer. If you can wait for them to do it automatically, it might be ideal to do that since it’s a sure-fire way of not impacting your credit score. Don’t fall into bad habits when you get a higher limit like charging more on it. Use your credit card responsibly by only using it for things you know you can pay back and keeping your credit utilization low.

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