A credit limit is the maximum amount you can borrow from a lender on a specific credit card. If you exceed that limit, your credit will tank and you will face penalties such as paying fees, a decreased credit limit, and more. Credit limits also help determine your utilization ratio which is the amount of credit used versus the amount available.
This is one of the most important factors when it comes to credit. If you have a credit card, it is important to understand every aspect to it. To learn more about how to increase your credit limit, continue reading on below.
Table of Contents
- 1 How to Increase Your Credit Limit
- 1.1 1. Calculate How Much Credit You Need
- 1.2 2. Keep Your Credit Record Clean
- 1.3 3. Don’t Request a Credit Limit Increase on a Whim
- 1.4 4. Apply to Increase Your Lowest Credit Limit
- 1.5 5. Don’t Request a Big Increase
- 1.6 6. Ask for a Credit Limit Increase Before You Do a Balance Transfer
- 1.7 7. Ask for a Temporary Credit Limit Increase
- 1.8 8. Don’t Give Up If You’re Rejected
- 2 Bottom Line
How to Increase Your Credit Limit
A higher limit will help you decrease your utilization ratio which in turn, improves your credit score. An increased credit card limit could also come in clutch when an unexpected expense hits you.
Simply ask your banker and request a credit limit increase either by phone or online. You might need to provide information such as your income, monthly housing status as well as the total amount of credit limit you want.
Some credit-issuing company will review your information and might pull a credit report, while others will instantly approve your request. Below, we will discuss 8 tips to help you increase your credit limit.
1. Calculate How Much Credit You Need
To determine how much you want to set your credit limit to, figure out how much credit you actually need for your normal spending habits. Be sure you can pay in full each billing period. If you spend more than you earn, increasing your credit card limit would negatively affect you.
2. Keep Your Credit Record Clean
A credit card issuer won’t want to increase your credit limit if you routinely exceed your existing limit or pay late. Maintain a clean record for at least six months before you apply so that you look less risky to the bank. Wanting to increase credit limits might be a warning sign to them that you’re in financial trouble.
3. Don’t Request a Credit Limit Increase on a Whim
When you apply, the credit card issuer might pull your credit report which results in an inquiry. Too many inquiries can negatively affect your credit score.
4. Apply to Increase Your Lowest Credit Limit
Avoid trying to increase an existing high credit limit, and instead increase your lowest credit limit. By raising a low credit limit, you’ll lower your utilization ratio which could improve your credit score.
5. Don’t Request a Big Increase
Banks might ask you to specify how much you want your limit to be. Other banks will decide the amount for you. If you’re not satisfied with your increase, you could apply again later but remember to wait.
6. Ask for a Credit Limit Increase Before You Do a Balance Transfer
If your credit card has good balance transfer terms, ask for a credit limit increase before. The issuer will be more willing to approve your credit limit increase if it means changing from their competitor.
7. Ask for a Temporary Credit Limit Increase
If you think the credit-issuing company might reject your application, you could ask for a temporary credit card limit increase. This is best used if you know a big expense is going to occur such as a medical bill.
8. Don’t Give Up If You’re Rejected
If you apply for an increase and get rejected, don’t give up. If you think you should be approved, call the credit card issuer’s customer service line and ask to be reconsidered. If you have a good record, they might grant the credit limit increase to keep your business.
If you need to borrow more from your lender, maybe an increase to your credit limit is necessary. Your credit card limit may be low now but hopefully with the 8 tips provided, you can increase that in the near future. For more posts like this, check out our list of bank guides!