If you have a credit card, you should be aware of your credit limit. This is the limit to how much you can charge (hint: it’s also called a “spending limit”). But what if you have a big expense? If you need to cover a medical bill or repair your car, those things won’t wait, and they may exceed your credit limit.
Having a low credit limit can make it hard to handle unexpected expenses. But where there’s a will, there’s a way! Let’s break down the most common questions about how to increase a credit limit and offer you some easy-to-understand answers.
Is a higher credit limit worth it?
Increasing your current credit line does more than give you a higher limit. We’ve already noted that it gives you more spending flexibility in an emergency. A higher credit card limit could also improve your credit score. That’s because your credit-utilization ratio is a significant credit score benchmark. Your credit utilization tells card issuers what percentage of your credit limit is being used — how close you are to the maximum.
Experts recommend a credit-utilization ratio under 30%. If you have a $1,000 limit and a balance of $300, that’s a 30% utilization ratio. (It’s also important to stay at or below that figure for all of your credit lines.) There’s one thing to remember, though – if you increase your spending to match the increase in your credit limit, it could hurt your credit-utilization ratio and lower your credit score.
If, on the other hand, you keep the spending down, the higher credit limit may make it easier to get other loans or credit cards. It also could help you get better terms on new loans, like lower interest rates.
How can I get a higher credit limit?
Before you request a credit limit increase, check your credit score and credit history. The three major credit bureaus (Experian, Equifax, Transunion) each allow one free credit report yearly. At Annual Credit Report, you can request all three — at no cost to you. (You can also review your credit history with Best Egg Financial Health – it’s free and available 24/7!)
When you receive your report, make sure that everything it says is correct. Verify your addresses, lenders, and payment history. If anything is amiss, you can file a dispute to correct the error.
Once that’s squared away, you can request a credit-limit increase. Most credit card issuers want you to apply for a credit limit increase online, through your account. Log in and find a button that says something like “Increase your credit limit.”
Typically, the credit card company will ask about your annual income, employment status, and monthly mortgage or rent. They’ll usually ask how much more credit you desire. Asking for an increase of between 10% and 20% may give you your best shot at getting a positive response.
If there’s an urgent need or an unusual financial situation, or if you have online issues, you may want to use the customer service phone numbers on your card or on your credit card bill to contact the card issuer.
How quickly can you increase your credit limit?
If you have a new credit line, it’s recommended that you wait six months before submitting a request to increase it. An earlier request may get rejected.
After you put in for a credit limit increase online, it might take anywhere from a few seconds to 10 days or longer to get a decision.
Nowadays, the card issuers are electronically tied into the credit bureaus. If you have good credit, the lender may immediately increase your available credit. However, any late monthly payments or maxed-out credit might trigger a further review of your accounts.
How can I raise my credit limit without asking?
Sometimes, a card issuer will increase your credit limit without you having to request it. Read the fine print, though. Your lender might request documentation about your job status, income, monthly housing payment, mortgage payment, or other items before they actually increase your credit limit.
Making your payments on time, making greater than the minimum monthly payment, and keeping your credit account clean all increase your chances of getting a pre-approval offer.
Does requesting a credit limit increase hurt my credit score?
It’s possible. When you request a copy of your credit report, it’s a soft inquiry and doesn’t affect the score. But if a lender does a hard credit inquiry, that may impact your credit score. That’s one thing to check before requesting an increase. On the other hand, if the request is approved and your credit-utilization rate drops, that’s good for your score. The long-term improvement of your score from a better credit-utilization rate may outweigh a short-term hit from the inquiry.
This shows why it’s important to check your credit score and credit history first. That should give you a better idea of whether you might get approval.
What happens if my request is turned down?
If a credit increase request is denied, some lenders send a letter with the reasons for the denial. If you don’t hear from the lender, email or call them. Ask them why you were denied and then work to build a credit history that may help with future approvals.
If you have new or limited credit history, pay down your balances by paying more than the minimum payment each month. Address any lurking collection debts. Then, wait a few months before submitting a new request. Recheck your records and fix anything negative. Build your score.
Credit cards can be a welcome and flexible resource, and they could provide borrowers with the freedom to make purchases easily and safely. Whether you’re at home or on the road, credit cards could offer financial confidence and peace of mind.