Credit card companies will typically increase the maximum amount of money they will let you borrow over time, particularly if you have good credit. But what if you want a higher credit limit before they offer it to you? Is there a good way to increase your credit and is it a good idea? Let’s find out.
Why Would You Want a Higher Credit Limit?
Not only will you be able to put more purchases on your credit card(Responsibly), but increasing your credit limit can also improve your credit score. That’s because your credit utilization, or the percentage of your credit line that you’re using, will decrease.
If you have $3,000 on a credit card with a total credit limit of $10,000, your credit utilization is 30 percent. If you have that same $3,000 balance with a $30,000 limit, your credit utilization is only 10 percent. The lower the percentage, the better it is for your rating. Whatever your credit limit is, Just make sure you stay below 30 percent.
Your credit utilization accounts for 30 percent of your credit score, so it can make a big difference. If you tend to carry a balance on your card from month to month, bumping up your credit limit can really help boost your credit score.
How to Increase Your Credit
If you have a good credit score and you’re in good standing with your credit card company, they will typically automatically increase your credit limit over time. You don’t even have to ask. However, if you haven’t seen an increase in your limit in six months or so, it’s probably time to take control of the situation.
- “I want to put more bills on the card”
- “I travel a lot or am planning to travel more”
- “I want to earn rewards for things I already buy”
The standard credit increase is between 10 and 25 percent. Don’t ask for more or you might be tagged by your card company. The request for a drastic increase in your credit line is a red flag.
When to Ask
There are good and bad times to ask for an increase in your credit line. Go after the bigger limit if you just got raise or if you’ve been on top of your payments for awhile.
It won’t necessarily hurt to ask for an increase even if you don’t think you’ll get it, but it might. Your credit card company might hard pull a credit report which can potentially hurt your credit score. This is particularly true if you have a short credit history or if you’ve recently had your report pulled by someone else. It happens, for example, whenever you apply for a new card. Too many pulls during a short time period will ding your credit score.
Along the same lines, only apply for a credit increase for one card. Applying with multiple cards at once may result in several hard pulls of your credit report. Even though each hard pull is less than five points, they can add up.
If you’re concerned that getting a report pulled will damage your credit score, you can try asking your credit card company to forgo the report. Sometimes they do this, although, you may not be offered as much of a credit increase.
What to Do If You’re Denied Credit Increase
Another tip to increase your odds credit increase is to use your card a lot and pay off your balance every month. As general practice, you should pay off your credit cards every month anyway. This is a great way to show the credit card company that you are serious about a credit increase and that you’re a reliable customer. Trust is key here. The more you spend and payoff, the better. An easy way to do that is to put all of your expenses on your card and to stop paying for things with cash.
If you’ve been denied and want a second chance, wait at least two to three months before making a new request. Card companies do not have to increase your credit limit, even if you’re in good standing. If you can’t convince them to increase your line of credit, it might be time to apply for a new card from a different bank. You can always call in advance of applying and ask for a range of credit you can expect given your credit score and income.
Don’t Strain Yourself
Don’t overspend after getting a credit limit increase. Just because you are able make more purchases, it doesn’t mean you should. It’s still best to pay off your card in full every month. Spend within your means and avoid carrying a balance. Pretend the credit card is a debit card by not spending more money than you have. Credit cards rarely have the best interest rates and you will end up wasting money on interest. Getting 1-5% of your purchases in miles is not worth getting a 15-29% interest charge. The debt defeats the purpose.