Your available credit limit is a huge factor in the scheme of things when it comes to assessing your financial life. The way that you manage your credit or card spending limit, can have unexpected repercussions like overlimit fees, or open up the door to an awesome credit score.
Having a higher credit limit comes with increased responsibilities, and how your credit score fares depends heavily on your habits. Tips like keeping your debt to income ratio low or avoiding the urge to max out your cards can help you maintain healthy credit and stay on track.
Ways to Increase Your Credit Limit
There are many ways to receive a credit limit increase and many of them begin with contacting your current credit card company or banking institution. Increasing your credit limits could be advantageous, especially if you are good with balancing your budget. However, on the flip side, if you find that you begin to spend more than you can repay, then it’s a quick recipe to lower your score.
Below you will find five tips to acquire the limits that you need and why you should consider increasing yours.
Request an increase from your credit card issuer
Many credit card issuers will grant you credit increases upon request. However, each of them have a process that you will need to go through. After answering a small questionnaire and awaiting a decision, your increase is usually available instantly.
Wait for automatic credit limit increase
Depending on what type of card you have such as a student card, credit rebuilder, or secured card, the credit card company will automatically provide you with an increase after establishing a positive payment history. Companies like Capital One, have promotions that provide you an increase within 6 months or so after completing their program.
Get a new credit card
A new credit card can provide you with an instant increase because it’s not only a higher limit, but a different card altogether. By getting another card, you are showing lenders that you can handle additional credit opportunities.
Increase your security deposit
A great way to give yourself an increase is to add more funds to your security deposit before you even get your card. Many second chance credit cards like those with Discover, Self Inc, or Citi, will allow you to determine your opening limit or add money until your account becomes fully activated.
Upgrade your current card
Some credit card companies have a process called PC’ing, which basically means that you can convert your existing card into one with a higher limit as well as increased benefits. To do this, lenders prefer you to have an excellent account history over at least a year in most cases.
How Is Your Credit Limit Determined?
Many credit card providers assess a series of factors when considering if and when to grant you an increase. They will typically look at things such as your payment history, amount of cards open, current spending limits and how many requests that you’ve made in the past.
Before making a decision on increasing your credit limit, your lender will have a look at your prior credit habits and whether you have been using your credit responsibly. This helps them to provide you with an increase that is more aligned with your income, and ability to repay based on previous patterns.
Another way that your card issuer can decide what limit you should have, is by checking your credit report to get a view of the way you handle credit with any of your other lenders. If the other accounts that you have show a favorable history with lower interest rates, then lenders are more likely to give you a competitive increase to match.
How to Improve Your Odds of Being Approved for a Higher Limit
Just because getting a credit limit increase may be simple doesn’t mean that you are automatically guaranteed to get one. If you are looking to get an increase you should keep the following things in mind in order to improve your odds of success.
- Timing – If you have only recently opened your credit card account then the lender is not going to look favorably at increasing your limits before you have had the account long enough to establish a positive history.
- Account Payments – Some lenders have restrictions on payment history over a recent time frame like within the past six months. If you have recently had a blemish such as a one time late pay then it may not be the best time to ask for an increase.
- Monthly Spending – When evaluating your account for an increase, you will have to ask questions regarding your planned spending amounts. If you don’t really think that you will be spending much more than your current limit, then you might want to reconsider until a later date.
Benefits of a Higher Credit Limit
Anytime that you receive a higher credit limit there are benefits and perks that you will also enjoy. These can include the ability to spend more, lowering your DTI or debt-to- income ratio, or making it easier for other lenders to offer increases as well.
Having a backup method of payment in between paychecks is an excellent way to keep a handle on your savings, and more spending due to a higher limit means more cash back rewards among other benefits:
- Easier likelihood of converting to a higher level card
- Multiple increases with other lenders
- Higher starting limits on newer cards
- Influx of lower introductory rate offers
- Fast placement into higher credit tiers
Having credit comes with just as much risk as reward and treating your credit in a responsible manner determines what side of the coin you get. However, with good money management skills and being on top of your credit score, the decision to increase your credit limit can be one of the best decisions that you make.