Whether you’re building your credit score or just looking for more financial flexibility, there are plenty of reasons to want a higher credit limit. But how do you go about getting it?
Credit card issuers are in the business of helping you spend more, so it might be easier than you think.
In this post, I’ll talk about the most common ways to get a credit line increase. Each strategy is simple, so you can work on building up your credit limit right away.
5 Ways to Increase Your Credit Limit
Here are five effective strategies that you can use to increase your credit limit right now.
1. Just Ask!
The simplest way to increase your credit limit is to simply ask your issuer for a bump up. If you have good credit and a solid payment history, there’s a good chance they’ll oblige.
How do you ask for a credit limit increase?
There may be different processes for this, depending on your issuer. While some may allow you to simply call in and ask, others might have a formal request system.
Also, keep in mind that they may not be open to an increase right away. This could be because your credit history isn’t long enough, so you might have to build up some good faith first.
2. Make On-Time Payments
As a cardholder, you are constantly evaluated by the level of risk that you present to your credit card company. The credit the company issues is determined by your perceived likelihood to pay it back. With this in mind, you want to let them know that you’re someone who pays and does it on time.
Many companies issue automatic credit limit increases for reliable customers. If you pay on time, you might get an increase without even trying. The longer you hold a credit card account and the more payments you make, the more enthused your issuer will be about increasing your line.
So, if you regularly pay off your credit card each month, you build a positive payment history with your credit card issuer. This will make them more likely to extend a larger line of credit your way.
3. Increase Your Credit Score
When you’re evaluated for credit or a personal loan, your credit score is the first place a lender will look. Credit cards are no different. A higher score simply makes you more attractive to lenders. This means higher limits and lower interest rates.
If you don’t know your FICO score, you should. There are plenty of free credit score platforms that can tell you. You might even have access to your score within your online bank account. Furthermore, you should know which actions affect your credit score positively or negatively.
Here’s a look at the top factors in your credit score:
This is the biggest one. Lenders want to know that you pay on time. If you never miss a payment, you can set your credit score up for success. And if you regularly miss your payments? It’s the fastest way to watch your score plummet.
This section concerns the amount of your available credit that you’re using. Here, the major credit bureaus (Experian, Equifax, and TransUnion) use what’s known as a credit utilization ratio.
Your credit utilization ratio is your total revolving balance (of all your credit cards) divided by your total credit card limit. The higher your ratio, the less available credit you have.
In general, you want to keep your outstanding debt to under 30% of your available credit. Otherwise, you’ll pay for it in your credit score.
Credit history length
This is the only factor that you don’t really have any control over. It’s also why you should get started with a (low limit) credit card when you’re young.
Creditors want to see a long history of on-time payments and responsible credit use. Unfortunately, if you just opened your first account, you don’t have a reputation yet.
However, credit history length accounts for a smaller percentage of your score than the above factors. So, you can still boost your score by paying on time and keeping your balance low.
Your credit mix refers to the variety of open credit-based accounts you hold. If you have several, say a credit card, student loan, and car loan, it shows that you can responsibly handle any type of credit (if you pay on time). On the other hand, if you have five credit cards and nothing else, your credit mix will affect your score negatively.
When you open a new credit account, the company considering your application runs a credit inquiry. This could either be a soft inquiry, which does not affect your score, or a hard inquiry, which does.
Your score will drop if you have several recent hard inquiries (also known as a hard pull) on your credit report. When you apply for several credit lines in a short period of time, it indicates a higher risk for lenders. Keep this in mind, and be sure to spread out any actions that’ll call for an inquiry.
4. Open a New Credit Card
If you’re looking to boost your overall credit limit rather than that of a single card, it might make sense to open a new account. This is especially true if you’ve reached the maximum amount of credit that a company is willing to offer.
There’s no reason to hold onto a ton of credit cards, but having a couple of different ones could make sense. Depending on how you spend, you might use multiple cards to earn points or cashback in different areas. For example, you could have one card that earns extra points on gas, while another is geared toward grocery shopping.
Also, if you’re having trouble paying off some credit card debt, you might want to consider a balance transfer. Many new cards come with a promotional APR for your first year or so, so you can save some money on interest.
Plus, you’ll probably be in line for some cashback as a sign-up bonus.
5. Minimize Credit Card Debt
So you want to increase your credit limit — great! Remember, credit card debt is often tied to some of the highest interest rates around. Therefore, credit card debt is something that you want to avoid at all costs.
With that in mind, here are some tips that’ll help you avoid fees and interest while building your credit score and earning points.
Pay your entire balance
If there’s one rule of thumb to follow, it’s this: Pay your entire balance every month. While it might be tempting to make the minimum payment and kick the can down the road, it’s a terrible habit to get into.
This is because every time you don’t pay your credit card bill in full, you pay hefty interest fees on what’s left. This is literally how credit card companies make money. However, you won’t pay a dime if you pay your balance off each month.
Plus, a big part of your credit score is calculated based on your available credit. So if you have a big balance sitting on your card, your credit score will probably take a hit.
Don’t miss payments
If you miss payments or don’t get them in on time, you’ll pay late payment fees plus interest on the balance. You also might see your credit score drop. Credit card companies don’t necessarily report every late payment to the credit bureaus, but they definitely will if it becomes a regular thing.
So, even if you can only afford the minimum, that’s better than being late. Credit card debt is costly enough without the added fees.
Spend less than you have
It might sound obvious, but the best way to stay out of debt is to only spend what you have. Living within your means is an essential component of personal finance. Whenever I talk to someone in a tricky financial situation, it often comes down to simple overspending — trust me, it’s better to get ahead of it.
As you increase your credit limit, try to keep your spending habits the same. It’s great to have extra flexibility for emergencies, but you shouldn’t treat your extra credit as play money.
If you think this might be tough, consider a secured credit card. These cards are directly linked to a bank account, and your credit limit is determined by the amount of cash you actually have.
Frequently Asked Questions
What is a credit limit?
When you open a new credit card, the credit card company automatically determines your credit limit, which is expressed in dollars. This is the amount you can spend (without making a payment) before your card maxes out. With a new card, your available credit is the total of your credit limit. As you make purchases and add to your credit card balance, your available credit decreases until you pay the card off.
How is your credit card limit determined?
Of course, every issuer is slightly different, but your limit usually comes down to a few main factors.
Any lender, including credit card companies, looks at a borrower’s annual income information, credit history, and employment status, among other factors. In general, your limit is based on the likelihood that you will pay back what you spend.
How fast can you raise your credit limit?
It depends on your credit card issuer and your financial situation. If your credit is in good shape, you can probably get a higher amount of credit pretty quickly. It’ll be trickier if you’re carrying a balance and missing payments.
Is it worth it to raise your credit limit?
It depends on why you want to raise it. An increased credit limit makes sense for certain situations, but not all.
Generally speaking, it’s definitely worth it as long as you can handle your increased limit without overspending. A higher limit increases your credit score, opening up opportunities for better interest rates and top-tier credit cards.
Does a credit limit increase request hurt your score?
It might, but not in a big way. Your issuer might run a hard inquiry if you request an increase, which docks you a few points. However, if the increase is approved, it’ll almost definitely add more points than you lost from the credit pull.
You Can Increase Your Credit Limit
At the end of the day, if you want to increase your credit limit, it comes down to being a good borrower. This means using the credit that you already have responsibly. On the other hand, if you handle your credit poorly, a lender won’t be particularly enthused about giving you more.
Fortunately, credit card debt is fairly simple to avoid, if you’re careful. Spend less than you have, pay off your balance on time, and don’t bite off more than you can chew — it’s really that easy.
If you do all of this, you’ll find that convincing a credit card company to increase your limit is pretty easy. From there, you can enjoy all the benefits that come along with a higher line. From a boosted score to lower interest rates, you’ll set yourself up for a smoother financial future.
Now that you know how to navigate credit limit increases, you should be in good shape to get after it. Just keep in mind the basic credit principles I covered here, and the sky’s the limit.