How and When to Request a Higher Credit Limit
April 3, 2019
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.
Credit cards are valuable tools that can work in your favor if you use them the right way. Plastic makes buying almost anything more convenient, for example, and you can even score cash back and travel rewards for each dollar you spend. Some credit cards also come with valuable consumer protections like guaranteed returns, extended warranties, and travel insurance.
But, “getting ahead” with credit cards requires a lot more than using them for purchases. To end up in the black, you’ll need to use your card only for purchases you can afford to pay off right away. If you choose to run up balances instead, you’ll wind up on the losing end of the spectrum — in debt and paying an average interest rate of over 17 percent.
Why Your Credit Limit Matters
Another important factor you need to consider is your credit limit — and even various credit limits you have on different credit cards. Your credit limit on any given card is the amount of money you can spend before you need to pay off some of your credit card’s balance to spend more.
Why does your credit limit matter? Several factors can come into play:
Your credit limit plays a big role in your credit utilization, which is the second most important factor that makes up your FICO score. Having a lower credit limit makes it easier to reflect high utilization, whereas a higher credit limit makes it look like you owe less. Example: If you owe $3,000 on a $4,000 line of credit, your credit utilization is 75%. If you owe $3,000 on a $10,000 line of credit, on the other hand, your utilization would only be 30%.
A low credit limit may not be enough in an emergency. Asking for a higher credit limit could help you prepare for emergency expenses that could crop up.
A low credit limit can also be inconvenient if you use your credit card for most of your regular spending. If your credit limit is low enough, you may even need to pay your credit card bill in full several times per month to keep enough open credit available.
With these situations in mind, it can absolutely make sense to ask your card issuers for a higher credit limit. Doing so can ensure your utilization remains low, which can help boost your credit score over time. Having a higher credit limit can also make it easier to charge emergency expenses or large expenses to your card if required.
Still, it’s important to remember that it doesn’t always make sense to ask for a higher limit. If you want to raise your limit so you can rack up more high-interest credit card debt, for example, you’re better off sticking with the limit you have. The average credit card interest rate is well over 17%, making borrowing with a card a pricey endeavor. If you need to borrow money and pay it off slowly over time, you may want to consider a personal loan.
How to Request a Higher Credit Limit
In some cases, your credit card issuer may decide to raise your credit limit automatically. This usually happens after you’ve used your card responsibly for 12 months or more, thus proving you are creditworthy.
An automatic credit limit increase is ideal because this type of increase won’t result in a hard inquiry on your credit report. Unfortunately, there’s no way to know when or if you’ll have your limit increased with no action on your part.
Fortunately, it’s possible to request a credit card limit increase with each of your card issuers. However, the way you go about it will depend on the type of credit card you have.
If you have a Chase credit card, for example, you are required to call in to request a credit line increase over the phone. American Express, Barclays, Citi, Bank of America, Capital One, and several other issuers allow you to apply for a credit line increase online.
If you have to call in, you can do so using the number on the back of your credit card. To file for a credit limit increase online, you can usually do so through your online account management page where it says something like “Card Services,” “Services,” or “Account Services.”
Regardless of how you apply for a credit line increase, here’s what you should know:
You will need to offer additional information to justify a higher credit limit. Many card issuers ask for details such as your current household income, your employment information (including how long you’ve been with your current employer), your monthly housing payment, and how much you typically spend on credit each month.
You may need to agree to a hard inquiry on your credit report. Many card issuers need to place a hard inquiry on your credit report in order to check on your credit health and gauge whether you qualify for a credit limit increase. You’ll need to consent to a hard inquiry before one can be placed on your report.
You may have to wait awhile. Depending on the situation, you may receive instant approval for a credit line increase. In other cases, you may need to wait anywhere from a few days to a few weeks. Either way, you’ll be notified whether your credit line has been increased by phone, email, or mail.
You may (or may not) receive the increase you really want. It’s possible your income and other factors may justify a smaller credit limit increase than you hoped for. Still, any increase is probably better than nothing.
Will a Credit Limit Increase Hurt Your Credit Score?
While there are many reasons to ask for a credit limit increase, you may be wondering about the impact on your credit score. Fortunately, this is one area where you may not need to worry much. It’s true that a hard inquiry on your credit report could temporarily ding your credit score, but it’s also true having more available credit can boost your score. These factors should balance each other out in the end.
Also remember that, if your credit limit increase is denied, you may get access to more available credit with another credit card. Before you sign up for a new credit card, make sure to compare available options in terms of their interest rates, rewards, and fees.