Your credit limit plays a bigger role in your financial life than just allowing you to spend more when using your credit card. Yes, getting a bigger credit limit can lead to being able to borrow large amounts of money, but it can also give your credit score a major boost if you know how to use an increase to your advantage.
Requesting a credit increase is pretty simple, so let’s look at how to increase credit limits and what the benefits of expanding your credit limit are.
What is a Credit Limit?
Simply saying once a credit card issuer gives you a permit for a credit card, it automatically puts you on the limit of how much you spend. If you happen to spend to the point of your credit limit then you cannot use the card until you pay down the balance enough to use the card. Some credit cards may permit you to go over your credit card limit but you would have to pay an over-limit penalty fee.
How to get a Credit Card
You would need a credit card before you think of increasing your credit limit. Credit cards are very important tools for finance which you use to pay your expense or probably for bigger than time purchases. Do you know the reason why you need the credit limit?
- Check and know your credit score: Credit score is what helps a user know and determine their creditworthiness and how likely they can pay back a loan. A bad credit score can affect your application for a credit card. Your credit card is accessible for free through different financial institutions.
- Shop around for the right choice of credit card offers.
- Read the fine print.
- Apply for the best credit cards for your need.
Important Document for a Credit Card Application
- Valid bank statements.
- Latest salary slips.
- Passport-size photograph
- Proof of identity.
- Proof of residence.
- Form 16.
- A completed application form.
Factors to Check your Credit Card Eligibility
Age: any individual that desires to get a credit card must be age 18 years and above. Some banks would have a minimum requirement of 21 years. The minimum is 18 years and the 80 years maximum.
Annual salary: Your income you get yearly is also a factor that determines your eligibility for a credit card. This is important because, with this, the card issuer can have the confidence that you are capable of repaying the money loaned to you.
Nationality or residential status:
How to increase credit limit on your credit card
The process of how to get a higher credit limit is pretty straightforward and you have three options for pursuing a credit limit increase. You can request a credit limit increase online, over the phone or through a lender invitation.
Generally, you can quickly request a credit limit increase through an online bank or credit account. The menu should have an option on it like “credit limit increase” or “credit line increase” that leads to you providing some personal financial information that the lender will use to evaluate if a credit limit increase is a good fit for you. You may have to share updated information about your income or monthly housing expenses. They may ask how much additional credit you’re seeking, so you’ll want to have a number in mind before applying.
While some lenders will grant a credit limit increase without performing a hard inquiry that can affect your credit score, others may do a hard pull before approving your credit limit increase. The lender should inform you in advance if they will do a hard pull, so you can decide if you want to proceed or not knowing that there will be a temporary hit to your credit score.
You can also call your credit card’s customer service number and request a credit limit increase over the phone. Like when applying online, you’ll need to provide the same basic information about your financial life.
Sometimes a credit card issuer will approach you about a potential credit limit increase without you having to request one. Lenders regularly invite cardholders to increase their credit limit, so keep your eye out for an email or online account message asking if you would be interested in additional credit. You may even receive a preapproved offer without having to apply or provide your current financial information.
Benefits of a higher credit limit
Getting your hands on a larger credit limit can be a really good step to take if you’re looking to improve your credit score.
Improved credit utilization
Five different factors are taken into consideration when determining your FICO credit score. One of the most important factors is your credit utilization ratio, which makes up 30 percent of your score and represents the amount of credit you have versus the amount of credit you’re currently using. For example, if you have $10,000 in available credit and are carrying a $2,500 balance, your credit utilization ratio is 25 percent. That’s a good ratio, because you want to keep your credit utilization ratio below 30 percent whenever possible. This is where a credit limit increase comes in. It’s a lot easier to keep your credit utilization ratio low if you have a higher credit limit.
More purchasing power
A higher credit limit also gives you more purchasing power—but tread lightly here because the bigger the balance on your credit card is, the lower your credit utilization ratio will drop. However, if you can pay off your purchases right away, having an increased credit limit allows you to spend more using your card, leading to earning more cardholder rewards.
Better terms in the future
An additional benefit of increasing your credit limit and landing a higher credit score at the same time, is that you may actually improve your borrowing terms in the future. The higher your credit score is, the better terms and lower interest rates you’re likely to qualify for in the future. Figuring out how to increase credit card limits now may save you money down the road when you apply for a new credit card or a mortgage or auto loan.
Helps in an Emergency.
Helps you earn attractive rewards.
Steps to Getting a Higher Credit Limit
Make a request online: Some credit card issuers permit you (the care holders) to ask for a credit limit increase online. Log in to your account and search for the option to submit a request. Requesting for higher income means higher security which issuers must consider when deciding to increase their credit limit.
Call your card issuer: you would find a number at the back of the card. Call the number and ask a customer service representative whether you are eligible for a higher credit limit.
Look for automatic increases: When the cardholder is using his card for a very long time and during his time of usage he used it responsibly. Some of the companies would give an automatic credit limit increase.
Apply for a new card: if you have been using your card probably and have been making on-time payments, you could be approved for a new credit card. But if the limit on the new card is not higher than the former it will still increase your overall available credit.
What improves your chances of being approved for more credit?
If you do decide that a credit limit increase is the right fit for you, you’ll need to understand how to raise a credit limit. The main thing you need to focus on is making sure that your credit habits reassure lenders that you’ll be able to pay off your credit cards in a timely fashion.
Before approving a credit limit increase, issuers typically want to know how much you’re earning and how much you’re spending on rent or mortgage payments. This is because they need to gauge whether or not you’re struggling to make ends meet, which would lessen the odds of making timely payments.
Issuers also look at account behavior, payment history and overall utilization levels, as well as how long you’ve had your account open and how you’ve handled it so far. Card companies want to feel confident that you’ll pay back any money you borrow, based on your income, assets and current obligations.
Some lenders also take your age into consideration, possibly because they view experienced credit holders as more experienced with handling the responsibility of an increased credit line.
How is your credit limit determined?
Your credit limit is determined in one of two ways. The credit card can come with a preset credit limit or the lender may offer you a credit limit based on your credit history and credit score. The latter is where having a strong credit history really comes in handy.
Whenever you apply for a new line of credit, lenders will take how you’ve used your previous credit opportunities before into consideration when deciding whether to give you the requested line of credit, how much credit to offer you and what kind of interest rate you’ll receive.
This is another reason why it’s a good idea for you to request a credit limit increase, as future lenders may consider your current credit limits when determining what credit limit to offer you. By showing them that you successfully handled an increased credit limit without maxing out your cards or falling behind on payments, you’ll be more likely to secure better terms and interest rates.
If you believe you can handle the increased responsibility of a larger credit limit, apply for one. You may benefit greatly by making this savvy money move.
What to consider when increasing your credit limit
As tempting as it may be to increase your credit line, there are some considerations to make, so you do not end up harming your credit in the process.
1. Make sure you can afford the new credit limit.
Just because a credit card issuer offers an extended line of credit, it is important to be sure that you can make the payments and afford the increase in fees.
2. Respond to lifestyle changes.
If you receive that big raise at work or have a big boost in credit, you could be a very attractive candidate for a credit line increase. Accordingly, most issuers recommend waiting if you have recently lost your job, reduced your income, or experienced a dive in credit.
3. Be prepared for the consequences.
Unlike a preliminary check, issuers are likely to issue a hard inquiry so they can check your credit score before making a decision on your request.
How long does it take increase credit limit?
A request for additional credit can take up to 30 days to review, or it may only take a few minutes. Once your request for a higher credit limit is approved, you’ll typically have access to your new credit line immediately.
Is it hard to increase credit limit?
It’s a very simple procedure. Don’t be discouraged if your request is denied. Your credit card issuer might increase your credit limit in the future when the timing is right. Bottom line: Try to time your credit limit increase request so it’s more likely to get approved.
How often do they raise your credit limit?
You generally need to be a cardholder for at least three months. You typically can only request an increase once every six months. Card issuers may review your credit report if you request a specific credit limit.
What’s a good credit limit?
A good credit limit is above $30,000 as it is the average credit limit according to Experian. To get a higher credit limit, you need an excellent credit score, a high income, and no existing debt. What qualifies as a good credit limit is different for everyone.
Can I buy a car with a credit card?
Yes, they do. Car dealers and auto lenders that accept credit cards as a form of payment, also charge a convenience fee. The fee is to cover the transaction fee of the car and it ranges from 2% to 4%. You should put into consideration the convenience fee before buying a car with your credit card.
Why do I have a low credit limit?
Every Lender has its standard and style of handling the amount of credit. The reason why you might be having a low credit limit could come from this option: it might have started when you were applying for a specific loan or credit card.