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When should I ask for a credit limit increase?

A recent poll revealed that 85 percent of cardholders who asked for a higher credit limit received one. A credit increase can not only improve your credit score, but it can also you access to more funds.

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When should I ask for a credit limit increase? 

If you want a credit increase, you’re likely to get one: a recent poll revealed that 85 percent of cardholders who asked for a higher credit limit received one. A credit increase can not only improve your credit score, but it can also you access to more funds. 

But before contacting your credit card issuer to ask for a new limit, weigh the pros and cons.

Benefits of a higher limit 

Lower credit utilization and increased credit score 

Credit score models like FICO will lower your credit score if you use most of your available credit because you are seen at risk of having trouble making future payments. 

If you regularly use more than 30% of your available credit each month, a credit limit increase can bring you within the optimal balance-to-limit ratio. For example, if your credit limit is $2,000, but you usually charge $1,800 each month, you’d regularly have a 90% credit utilization, which can damage your credit score. However, if you raise your limit to $10,000, you’d only be using 18%, which would make a big difference to your credit score. 

Access to emergency funds 

Having a higher credit limit can help if you find yourself in an emergency that you can’t pay for with cash. If you’re traveling abroad, for example, and need to make a last-minute trip at home, you could easily pay for a plane ticket with your credit card even if you don’t have any local currency. 

Drawbacks of a higher limit 

Requesting a credit line increase from your issuer might trigger a hard inquiry to your credit report, but as long as you manage your credit well it should balance out in the short-term. In fact, increasing your credit limit can often help your credit score if you keep your usage the same as your utilization ratio will go down.

Who is most likely to receive a higher limit? 

When you manage your finances well. If you’ve been a long-time account holder of your credit card or have demonstrated that you can manage your finances responsibly, it’s more likely that your request for a limit increase will be granted. Credit card issuers want to ensure that their customers have a proven track record of success. That includes making timely payments and maintaining a low balance.

When you’ve received a raise. More income means you will have access to more funds to cover larger purchases. In order to be eligible, your credit card issuer may ask you to provide proof of your raise before your higher credit limit will be approved.

When you haven’t applied for new lines of credit. If you haven’t applied for new lines of credit, there’s a better chance that a credit card issuer will honor your request for an increase in your existing line of credit.

How to increase your credit card limit

There are two main ways that you can increase the limit on your credit card. Below, we’ll examine both options.

1. Wait for an automatic increase in your credit limit

If you’ve been a loyal customer and have proven that you are a responsible borrower, you may receive an automatic increase in your credit limit. In other words, your credit card issuer may extend your credit limit without you even having to ask.

Many credit card issuers provide automatic limit increases to responsible borrowers. It’s like they’re way of rewarding you for making your payments on time and keeping your balances low. You may receive automatic increases on your credit limit once a year, or even as often as once every six months.

If you do receive automatic credit increases, your credit card issuer will typically notify you. You’ll receive an official letter from the credit card company, which will indicate how much your line of credit has been extended. 

2. Ask for an increase in your credit limit

You can make an inquiry yourself if you don’t want to wait on an automatic increase, but how you go about asking for a credit limit increase will vary from card issuer to card issuer. Some banks allow you to make requests right from your online credit card account, while others may require you to contact customer service.

If you are contacting your lender directly, you may need to provide evidence that you are eligible for the increased credit limit. For example, you may need to provide evidence that you have the financial means to cover the additional credit line.

Before making a direct request, however, note that your credit report may receive a hard inquiry, which can bring down your credit score. However, the benefits of increasing your credit limit usually outweigh the effects of the hard inquiry on your report.

The takeaway

Increasing your credit limit can give you more buying potential and decrease your credit utilization ratio. But before making a request, ensure that requesting a credit limit is actually in your best interest. Having more credit available to you can bring down your credit score if you don’t have the means to pay for more debts or if you have a history of making late payments. Take your financial situation into consideration before you set out to make a request for a credit limit increase.

For more advice on improving your credit situation, check out Nova Credit’s resource library

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