Strategies to Increase Your Credit Limit
What Is a Credit Limit?
A Credit Limit is the maximum amount of credit a financial institution or lender will extend to you. This is the maximum amount your credit card issuer will allow you to borrow.
First, make sure you’re requesting a credit increase for the right reasons. Card issuers will ask and take into account your reason for increase. Increasing your limit to spend more will hurt your credit. Especially, if you have no intentions to pay on time. You should still maintain good spending habits even with a higher limit.
Know Your Credit Standing
Know your score prior to requesting an increase. Most card issuers come with free credit monitoring services. Review your FICO score and areas for improvement. Then, determine if a limit increase would be a good idea right now. Remember, requesting an increase could place a hard inquiry on your credit profile.
Timing is everything!
Card issuers generally want to see more income before increasing your limit. They want to know you have the funds to pay them back. Remember, increase requests are HARD inquiries therefore your credit score could drop once you apply. So make it count! Granted, the inquiry only drops your score a few points temporarily. Nevertheless, the goal is to increase your score as much as possible.
Card issuers review accounts every 6 months. If your account is in good standing you will naturally receive a credit limit increase.
Call your card issuer and ask are you eligible for an increase. They may ask you the reason for the increase, so be prepared. This may be a better option for you to help avoid the risk of being denied.
Evaluate your standing:
- Has your income recently increased?
- Do you keep your total utilization rate under 30% ?
- Have you been a loyal customer? Months/Years (Been a customer at least 6 months)
- Do you pay more than the minimum balance or in full each month?
- Are your payments always on time?
Consider a balance transfer
Balance transfers move one debt balance from one creditor to another. Transfers simplify payments by essentially moving your debt balances all to one place. Henceforth, make it easier for you to make your payments on time. Doing this PROPERLY increases your credit score and credit standing. Still, take caution and consider the pro’s and con’s. Performing a transfer prior to considering the risks can hurt you more than it can help you.
How much of an increase should you request?
Don’t bother asking your card issuers agent. It’s a good idea to request an increase of 10-25%. Keep in mind, this does not apply to everyone. Those with good credit histories and individuals who have an increased income may receive greater increases than others.
Looking for a high-limit credit card increase ($10,000 and above)?
Receiving these kind of limit increases are only obtained by past creditworthiness and INCOME. Do you first have the income to afford this? You may have excellent credit. However, you’ll never get approved if your income doesn’t match up. Review your debt to income ratio. Then, review your payment history. Do you have good payment history? Your credit and payment history may be of good standing. Nonetheless, your income does not allow for a greater spending limit. If this scenario applies to, look into ways to increase your income.
Here’s a BIG secret..
Increasing your credit limit to lowers your credit utilization rate. As a result, this increases your credit score and spending power. Your credit utilization rate accounts for 30% of your credit score. The more you spend on a lower credit limit increases your utilization rate, lowering your credit score. It’s also good to remember debt to income ratio matters here too.