Ever heard of a credit limit?
A credit limit is the maximum amount of money you can spend before you need to pay off some of your credit card’s balance. Depending on the credit card and user, the balance can range from a few hundred dollars to tens of thousands of dollars.
Your credit limits matter more than you think – and not just because they affect how much you can spend. Your credit limits can also affect your credit scores.
But you may be surprised to find out that you have some control over your credit limit and can use it to your advantage.
Read on to discover how increasing your credit limit might improve your credit scores and to learn strategies you can use for requesting and receiving a credit limit increase.
Why Does Your Credit Limit Matter?
When lenders consider your creditworthiness, they look at one or more of your credit reports and scores from the three major credit bureaus: ExperianTM, Equifax® and TransUnion®.
Your credit scores are calculated using different factors in your credit report. A large part of your score is made up of your payment history, so it’s critical to pay all your bills on time. But your credit utilization ratio, the percentage of your total credit card balances compared to your total credit limit, makes up another large part of your credit scores.
A lower credit utilization ratio has a more positive impact on your credit scores. To demonstrate how credit utilization works, let’s look at a couple of scenarios.
- Charlie has one credit card with a $5,000 limit. Their balance is $2,500. Therefore, Charlie’s credit utilization ratio is 50%.
- Alex has two credit cards, each with a $5,000 limit. Their total credit card limit equals $10,000. Alex’s total credit card balance equals $2,500, just like Charlie’s. But because Alex has a higher credit limit, their credit utilization ratio is only 25%, which could be better for their credit.
If Charlie wants to decrease their credit utilization ratio, they can pay down their credit card balance – which could save money on interest, too. But if Charlie can’t afford to pay off their credit card balance right now, they can either apply for another credit card or request a credit limit increase with their current credit card.
This is why your credit limit matters when it comes to credit scores – your credit limit affects your credit utilization which affects your credit scores.
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What Are the Benefits of a Higher Credit Limit?
Getting approved for a higher credit limit has some pretty sweet benefits (like boosting your credit score) and can set you up for future success.
Lower credit utilization ⬇️
Asking for a credit limit increase gives you the chance to lower your credit utilization even if you don’t have the funds to pay off your credit card balance at the moment. And lowering your credit utilization can boost your credit score.
More purchasing power 💪
When you are approved for an increase, you have access to more money. Just remember that keeping a higher balance on your card means a higher credit utilization ratio. Paying off your purchases right away allows you to purchase larger ticket items, keep your utilization low and help you earn more spending rewards.
Future financing 🔮
A higher credit limit, when used responsibly, can lower your credit utilization and boost your credit scores. This means a higher credit limit can indirectly set you up for getting better terms and lower interest rates on future financing because of those higher credit scores.
What Should You Know Before Increasing Your Credit Limit?
Before diving in, we want to share a few words of caution.
Credit card debt isn’t always worth it
If you’re not sure you’ll be able to handle your new credit without acquiring more credit card debt, it might not be a good idea to get an increased credit limit. Seriously, those Coachella tickets can wait. But if you’re confident you can pay your bills on time and pay any new charges in full each month then you should be good.
Only apply for a credit limit increase when it makes sense
A good time to request an increase is after you get a raise, when your spending habits change or when you have improved your credit scores. It’s also a good idea to wait about 6 months between requesting credit limit increases.
You may only get so much credit
A credit card issuer may only be willing to extend a certain amount of credit to you based on all of your accounts. So a credit limit increase on one card could take away your ability to increase your limit on other accounts or open new accounts. This is why transferring a credit limit from one card to another might make sense (more on this later).
How Do You Get a Higher Limit on Your Credit Card?
There are two basic strategies for increasing your credit limit: waiting for an automatic increase and requesting an increase.
Method 1: Wait for automatic credit card limit increases
Many credit card companies increase your credit limit automatically, without you having to lift a finger. If you show you’re a responsible credit card user and use the card enough to warrant a credit limit increase, you could get a higher credit line as frequently as every 6 – 12 months.
You can increase your odds of getting an automatic credit limit increase by:
- Building a positive payment history, never making late payments and never causing payments to be returned.
- Using the card frequently. This generates swipe fees for the bank. If you don’t use the card often, you likely won’t be offered a credit limit increase.
Method 2: Request a credit limit increase
Before you contact your card issuer, however, note that requesting a credit card limit increase often results in a hard inquiry on your credit reports. A hard inquiry happens when a lender checks your credit with one or more of the three credit bureaus in order to make a lending decision. Luckily, automatic increases won’t generate a hard inquiry on your credit report.
When you submit a request for a credit limit increase, your card issuer will make one of three offers:
- Agree to your credit limit increase request.
- Counteroffer with a credit limit increase for a lesser amount.
- Deny your request for a credit limit increase.
In the case of a denial, you’ll usually have to wait a while before trying again, 6 months is a safe bet. In the meantime, make sure you keep your payment history spotless and continue to use the card often and responsibly.
Requesting a credit limit increase online 🖥️
When you’re ready to request a credit limit increase, your online account should be your first stop. While every card issuer is different, you may be able to follow these basic steps to make your request:
- Log in to your credit card account.
- Find the “Credit Limit Increase Request” link or section.
- Fill in all of the requested information and submit.
There will likely be a section asking for your reason for requesting an increase. Qualifying reasons could include:
- A history of on-time payments
- Frequent use of the card
- An improved credit score
- An increase in income
- A change in spending habit
- Plans to make a balance transfer to the account
Depending on your card issuer and request, you could be approved or denied for a credit limit increase immediately or it could take several days to process. If your card issuer needs time to process your request, it will notify you of its decision either through an online message or a mailed letter.
While requesting an increase online can be quick and easy, you may not be able to explain your reasoning for requesting the increase as thoroughly as you can over the phone.
Requesting a credit limit increase by phone 📱
If you can’t request an increase online or would prefer to speak with someone over the phone, prepare to share some information with the customer service representative:
- Address and Social Security number
- Current employment status
- Total monthly and annual gross income
- Monthly housing payments
- Amount of requested credit limit increase
Once you have all of your information together, it’s time to make the call:
- Dial the number on the back of your credit card.
- Tell the customer service representative you’d like to request a credit limit increase. You may be transferred to a different representative in a credit risk department.
- Request your increase in a courteous manner. Remember that credit card issuers aren’t obligated to say yes.
- The issuer may accept, counter or deny your request immediately, or say you’ll need to wait for an online notification or letter.
How Large of a Credit Limit Increase Should You Request?
There’s no one-size-fits-all answer to how much of a credit limit increase you should request. It depends on your income, credit score and account history.
If you’re looking for a small increase, credit card issuers may be able to approve this based on your income and account history alone. Larger credit limit increases, on the other hand, will likely require a hard inquiry on your credit reports.
If you’re comfortable with a hard inquiry, you might want to start by requesting a credit limit that’s twice the size of your current credit line. If you’re denied instead of receiving a counteroffer, you may have requested too much for that particular credit card company and your current credit level.
You should also think about your spending habits. 💳
What size credit limit can you handle responsibly? If an increased credit line is going to lead to increased charges – and higher interest and minimum payments – it’s probably not worth it.
Do you often maintain a credit card balance? If so, you might not want to request a credit limit increase. Instead, it may be better to focus on paying your bill in full each month.
Does Requesting a Credit Limit Increase Hurt Your Credit Score?
Great question! And is it better to request a credit increase on your credit cards one at a time or all at once? Unfortunately, this is one of those “it depends” situations. 🤷
Unlike most loans where multiple hard inquiries from different lenders during a certain time frame count as one on your credit reports, each hard inquiry from a different credit card issuer counts as its own hard inquiry.
The more credit limit requests you make, the more hard inquiries end up on your credit reports. If you have a lot of credit cards, these inquiries could bring your credit scores down in the short term.
They could also prevent you from opening new cards, as some issuers deny applicants who’ve had more than a certain number of inquiries in the past two years. FYI, any hard inquiries that you initiated will fall off your credit reports after two years.
That being said, if you successfully negotiate higher limits on several cards at once, your credit utilization ratio should go down and your credit score may go up. However, all of the hard inquiries causing a drop in your scores may even out the boost you could get for lowering your utilization ratio.
But if you request increases for your cards one at a time every few months, you’ll build your credit limits over time and space out the hard inquiries. Your credit limits may increase more slowly than when you request increases all at once, but the immediate negative impact on your credit scores could be less severe.
Can You Transfer Your Credit Limit?
If you get denied a credit limit increase, don’t give up. Another strategy you can try is to apply for a new credit card from the same issuer and, if approved, transfer a portion of your new credit line to your original credit card.
Imagine you have one card with a $10,000 limit and another with a $20,000 limit. You could ask to transfer $5,000 of your credit line from the second card to the first card, giving both cards a credit limit of $15,000. Since you’re not applying for more credit, and instead are just asking to move your current credit around, you may have better luck.
To transfer your new credit line to the original card, you’ll need to contact customer service. Depending on the issuer, your credit limit transfer may be approved immediately or you may need to wait days or weeks.
Or if you already have two credit cards from the same issuer, you can ask to move a portion of your credit line from one card to another.
Keep in mind that moving a portion of your credit line from one card to another won’t lower your overall credit utilization ratio. However, it could potentially lower your utilization ratio on one account.
The Limit Does
Besides paying off debt, increasing your credit limit is one of the quickest and easiest ways to improve your credit score. Just make sure you’re using your new purchasing power responsibly.
Although we’d love to say that the limit does not exist on credit limit increases, there’s likely a cap based on your financial situation and credit scores.
If you don’t want to wait for your credit card issuer to make the first move, the strategies above can help you request a credit limit increase when you’re ready.
The Short Version
- Getting approved for a higher credit limit has some pretty sweet benefits (like boosting your credit score) and can set you up for future success
- Depending on your card issuer and request, you could be approved or denied for a credit limit increase immediately or it could take several days to process
- There’s no one-size-fits-all answer to how much of a credit limit increase you should request. It depends on your income, credit score and account history