If you’ve been paying your bills on time, keeping your credit utilization ratio low and managing your credit responsibly, you might be ready for a credit limit increase. Whether you need access to more funds, want to build your credit or just hope to make day-to-day spending a little less stressful, requesting a higher credit limit can help.
Why consider a credit increase?
If you use your credit card regularly, requesting a credit limit increase can feel like a smart next step.
Benefits of increasing your credit limit
A credit card limit increase can offer opportunities for a healthier financial future through:
Increased spending power: Make larger purchases without worrying about running out of available credit. This can be particularly helpful for emergencies or unexpected expenses.
Improved credit score: A lower credit utilization ratio — the amount of credit you use compared to your total available credit — is a positive factor in credit scores. So, having a higher limit while spending less can improve your credit score.
Building credit: As you demonstrate your ability to manage debt responsibly and prove your creditworthiness, limit increases can boost your credit profile.
Potential for better loan terms: Responsible credit management can lead to lower interest rates on mortgages or personal loans.
Downsides of increasing your credit limit
A credit limit increase can also carry risks, including:
Increased spending and debt: Having access to more credit can make it easier to spend excessively, which could lead to greater debt if you’re not careful.
Hard inquiry on credit report: If you request a credit limit increase, your credit card company could pull your credit report. This would be recorded as a “hard inquiry,” which can slightly decrease your credit score.
Impact on future loan approvals: Lenders might view a higher credit limit as a bigger risk, even if you don’t use it fully. This could affect your ability to qualify for loans, as well as lead to less favorable loan terms.
When is the best time to request a credit line increase?
You might be ready for an increase if:
You have good credit: A good credit score (670 to 739) can signify that you’re responsibly managing credit, which could lead to a lender approving a higher limit.
You get a raise: As your income increases, you might be able to afford more expenses.
Your spending habits change: Buying a house or starting a family can impact how you spend. You might request a credit increase to more comfortably cover expenses like groceries or furniture.
You may want to hold off on increasing your credit limit if you have bad credit, your income has decreased or you’ve maxed out your card.
Times to avoid requesting an increase
You may want to hold off on increasing your credit limit if you have bad credit, your income has decreased or you’ve maxed out your card.
How often can you request a credit limit increase?
While there is no strict rule on how often you can request a credit line increase, it’s generally recommended to wait at least six months between requests. That’s because some credit issuers may run credit checks or perform a hard inquiry after each request, which can impact your credit score.
How to request a credit limit increase
Credit limit increases can happen automatically by your lender or by your request, which you can do online or over the phone with your credit card issuer.
Does requesting a credit limit increase affect your credit score?
Requesting a credit limit increase can temporarily lower your credit score, but the impact is usually minor.
Why did my credit limit increase automatically?
Did your credit limit increase seemingly on its own? It’s likely due to your positive credit history, which can include paying your bills on time or having a low credit utilization ratio, as a bonus for your loyalty.
Should you accept an automatic credit limit increase?
In addition to being a reward for responsible credit management and loyalty, credit card issuers might also use an automatic credit limit increase to encourage more spending. It’s important to consider your own financial situation and habits before accepting the increase.
Turn better credit into a better future
As with most financial decisions, it’s important to weigh the risks and rewards before requesting or accepting a credit limit increase. But if you have good credit and are a responsible spender, increasing your credit limit can be a great way to improve your financial future and increase your spending power.
