guides

How To Increase Your Credit Limit on a Credit Card

By February 14, 2022 No Comments

Deciding to get a higher credit limit on your credit card can be a good idea in certain cases; however, it also has the potential to harm your financial situation. If you are a cardholder who can reliably pay your credit card bill in full and in a timely manner, increasing your credit limit could improve your credit score by lowering your credit utilisation ratio. However, those who struggle with overspending could find that a higher credit limit might be dangerous.

 

How Much of My Credit Limit Should I Use?

The amount of your credit limit that you use is known as your credit utilisation ratio. Generally, cardholders are recognised as more responsible if their credit utilisation ratio is low. The typical advice is to keep your credit utilisation ratio below 30%.

 

Why Might You Need a Higher Credit Limit?

If you have good or excellent credit, requesting a higher credit limit can help to further improve your credit rating as it keeps your credit utilisation ratio low. This ratio demonstrates how much you currently owe divided by your credit limit. Thus, a low rate shows that you are spending sensibly and living within your means. 

Financial experts recommend that to have a good credit utilisation, the ratio should not exceed 30%. If you are spending more than 30% of your available credit every month, it can be damaging for your credit score – even if you are paying off balances.

For cardholders who have recently started to earn more money, this may be an opportune moment to apply for a higher credit limit. It means that even though you plan to spend the same amount, your credit limit is higher and thus, you are spending less of the available balance. This results in a lower utilisation.

 

Ways to Get a Higher Credit Limit

There are different options available if you want to increase the credit limit on your credit card, including the following:

1.Request an increase from your card issuer

In order to increase your credit limit with certain credit card issuers, you will need to request for them to raise your limit. You can usually do this online or over the phone. If you choose to do this online, you most likely need to sign into your account and find where it says you can submit a request. It is possible that you will need to update your income information as well.

Alternatively, you can usually call the number on the back of your credit card and speak to a customer service representative about your eligibility for a higher credit limit.

 

2. Look out for automatic credit limit increases

Certain credit card issues will automatically raise your credit limit as you demonstrate that you are able to handle your credit responsibly. To be eligible for this, it will usually depend on you using a manageable percentage of your total credit limit per month and meeting your monthly payments on time. If you meet this criteria, many credit card companies will take this into consideration when reviewing your account and automatically raise the credit limit.

 

3. Apply for a new credit card

If you have a history of timely payments with your existing credit lines, and have a good financial profile, you may be approved for a credit card that offers a higher limit. Whether the limit on the new credit card is higher than your existing credit card or not, you will have access to more credit.

 

What are the risks of requesting a higher credit limit?

Before requesting a higher credit limit, there are certain risks that you should consider. As with any big decision, you should evaluate why you want to do it and what the pros and cons might be. For example, if you want a higher credit limit because you are wanting a lower utilisation rate to improve your overall credit score, this may be a good idea. However, if you are seeking higher credit to solve ongoing financial problems, this could be a dangerous move.

Think about when you are requesting a higher limit. If you have just had a pay rise or moved to a new job with a higher income, this could be a good time to contact your credit card issuer – especially if you have a good track record of making timely payments. However, if you have recently applied for other lines of credit, have experienced a drop in your income, or you have poor credit, it may not be a good time to request a credit card limit increase.

Additionally, requesting to increase your credit limit could lead to a hard credit check which may, in turn, knock points off your credit score. This is especially dangerous if you have already applied for other lines of credit during the past year. For more information on hard and soft checks, read our guide on how credit checks work

 

What Will Credit Card Issuers Ask When Requesting a Credit Limit Increase?

Apart from the credit card issuers who provide automatic credit increases, requesting a credit limit will involve speaking to a credit card issuer either via the phone or online. In general, they may ask you to update your income information to see if you have had an increase in income. They will usually also ask you the credit limit increase that you are requesting and the reason for the increase.

 

How Many Times Can You Ask For a Credit Limit Increase?

There is no limit to how many times you can request an increase on your credit limit; however, it could be harmful to make multiple requests. The more times you request an increase, the less likely you are to be approved, as it makes you seem like you are in a desperate financial situation. If you wait a few months between your requests, it could improve your chances of approval.

 

How Can You Avoid a Credit Limit Reduction?

Your credit card issuer may reduce your credit limit if they believe that you have become a more risky cardholder. There are lots of reasons this may be such as missed payments, card inactivity or reductions in income. However, reasons will vary from lender to lender and in some cases these situations will not lead to a reduction in credit limit.

Leave a Reply