To increase or not to increase your credit limit, that is the question. A higher credit limit means you’d be able to spend more on your credit card – what could be wrong with that? Before figuring out when and how to increase credit limit for your card, you should ask yourself first why you want to increase your credit limit. Your creditor will try to answer the same question.
3 reasons to ask for a higher limit (and 3 reasons to make you hit pause)
There are lots of reasons you might want a higher credit limit, but only a few really good, financially responsible reasons to ask. We’ll run you through good reasons to request a higher limit and the reasons you should press pause. Check them out, and take stock of where you’re at.
- More flexibility: A higher credit limit gives you more flexibility with your spending.
- Improve your credit score: A higher limit can improve your credit score by lowering your utilization, as long as you keep your spending constant. Your credit utilization, which is the portion of your credit line you’re using at any given time, makes up 30% of your FICO credit score. Keeping your spending the same with a higher credit limit can make a big difference for your credit score.
- Increase your rewards: When you’re in control of your credit, more spending flexibility can also mean earning more rewards. Say hello to better savings!
- Financial Emergencies: If you’re in desperate need of more cash, this is not the best time to ask for a credit limit increase. If you absolutely have to and are approved, make sure you have a concrete plan for repayment.
- Access to more spending money: If you frequently max out your cards or are struggling to make payments, giving yourself more to spend (and more potential interest to owe) is probably not the best move. Wait until you’ve gotten your credit habits under control to ask for a higher limit.
- To pay off another credit card balance: Your creditor will know about your other credit card debt, so your approval odds will be lower. Try a balance transfer card instead!
If you want a higher credit limit to take advantage of these benefits, ask away! If you’re constantly finding yourself close to maxing out your credit card or you’re in the middle of financial emergency, you should probably press pause.
When to ask for a higher credit limit
Now that you know you’re asking for a credit limit increase for the right reasons, it’s time to strategize. There are a few things you can do to put yourself in the best position to get approved. If you know what your credit card provider is looking for, you should be able to ace it! Here are some of the factors they’ll be considering, and what you can do to optimize your chances of approval.
When you request a higher credit limit, your card provider will make a hard credit inquiry to see how you’re doing with the credit you’ve already got. (That means your credit score will take a temporary hit.) Depending on how much of an increase you’re asking for, you’ll want to have a good or excellent credit score. This shows your creditor that you’ve been responsible with the credit you’ve had so far, and will do well with more.
Another factor your card provider considers is your payment history. If you’ve had a lot of late or missed payments on your credit report, you probably won’t be approved for an increase. Creditors want to see that you’ll make payments in full and on time. If you’ve had trouble keeping up lately, it’s probably not the best time to ask.
If you’ve recently had a raise or an additional source of income, now is a great time to ask for a credit limit increase! It shows that you have additional spending power, meaning you can pay a higher credit card bill.
If you’ve got these three things in line, you have a good chance of getting approved! Now, the only question left – how to actually ask for a higher credit limit.
How to increase credit limit
The exact process depends on your credit card provider, but you can often request a credit limit increase online. Log into your bank’s website, and see if there are any options to request a credit limit increase there! If not, give your bank a call, and find out what the process is so you can get started.
Now that you know why, when, and how to increase your credit limit, you’re ready to apply and (hopefully!) get approval for your new credit limit. Once you’ve been approved, keep spending responsibly. Use your higher limit to improve your credit utilization.