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 Do You Want a Higher Credit Limit?
Not only will you be able to put more purchases on your credit card, 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 $2,000 on a card with a total credit limit of $10,000, your credit utilization is 20 percent. But if you have that same $2,000 balance with a $20,000 limit, your credit utilization is only 10 percent. The lower the percentage, the better it is for your rating. Whatever your credit limit, you really want to stay below 30 percent.
Your credit utilization accounts for 30 percent of your credit score, so it can make a big difference. If you often 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 matters into your own hands.
The best thing to do is to simply call your credit card company and ask for a credit increased. Most card companies will let you do this online, but if you get someone on the phone you can sell yourself. Remind them that you’re a loyal customer that pays on-time and that you have a great credit score.It’s also a good idea to come up with some reason for wanting the increase. Here are a few suggestions:
- You travel a lot or are planning to travel more
- You want to put more bills on the card
- You want to earn rewards for things you 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 need for a drastic increase in your credit line is a red flag.
When to Ask
There are better and worse times to ask for an increase in your credit. Go after the bigger limit if you just got raise or if you’ve been on top of your payments for awhile. Conversely, avoid applying if you’ve just changed jobs and are earning less or if you’re credit score’s recently taken a few dings.
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 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 zap 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.
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. They will sometimes do this, though you may not be offered as much of a credit increase.
What to Do If You’re Denied
If you’re denied, find out why. If it’s because of your credit score, take a look at your credit report to see if there’s any incorrect information or questionable activity. If there are errors, get them corrected immediately by contacting the credit reporting company that put together the report.
Another tip to increase your odds is to use your card a lot and pay off your balance every month. This is a great way to show the credit card company that you’re serious about a credit increase and that you’re a reliable customer. 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. Credit card companies don’t want desperate customers, so avoid acting like one.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 issuer. 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 Overextend Yourself
Don’t go crazy after getting a credit limit increase. Just because you can make more purchases, it doesn’t mean you should. It’s still best to pay off your card every month. Spend within your means and avoid carrying a balance. Credit cards never have the best interest rates and you’ll end up paying a lot of extra money. If you can’t pay off your card, make at least the minimum payment. Missing that will incur extra penalties and it won’t do your credit score any good either.