Every credit card in your wallet has its own credit limit you can use as needed. There are times when you may want access to more available credit for a significant purchase or other needs. Read on to discover if requesting a credit increase hurts your credit score and when are some good times to make that request.
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Consolidated Credit is a nonprofit with nearly 30 years of industry experience offering credit counseling services.
How Asking for a Credit Limit Increase Works
Asking for a credit limit increase is usually a straightforward request. Either you sign into your credit card account online or on the credit card issuer’s mobile app and submit a form requesting a credit limit increase. Or you call the credit card issuer using the telephone number on the back of your card and ask customer service whether you are eligible for an increase. Creditors will ask about your current income, employment status and housing costs. If your credit is in good standing, you might apply for a new credit card with a higher credit limit. It’s also possible that you may qualify for an automatic increase if you have had the credit card for a long time and are using it responsibly.
Pros and Cons of Requesting A Credit Limit Increase
There are things to consider with every financial decision you make, so it makes sense there are pros and cons of requesting a credit limit increase. The pros of getting a credit limit increase include having more access to money for larger purchases and the potential that your credit score will improve with a lower utilization ratio. Plus, you will have more available credit to fall back on in case of a financial emergency. Now, if you’re asking if there’s a downside to requesting a credit line increase, there are some cons as well. For one, your request will result in a hard inquiry on your credit. Inquiries have a minimal impact on your credit score, but if you’re applying for a credit increase on multiple accounts, it could mean your credit score will dip. Also, having access to more credit may lead to more debt, which could mean steeper interest payments over time unless you pay your credit card bills in full each month.
Does Requesting a Credit Increase Hurt Your Credit Score?
It’s common to wonder what requesting a credit increase could do to your credit score. In general, changes to your credit may have a short-term effect on your credit score, causing it to go down temporarily. However, increasing your credit limit on credit cards can actually help your credit in the long run if you don’t use all the credit you’re allowed. That’s because an increase in your credit limit could reduce your credit utilization rate, which is a ratio of your credit card balance to your credit card limit. For example, if your available credit limit increases from $10,000 to $15,000, but your balance stays at $5,000, your credit utilization ratio decreases from 50% to 33%. The lower your utilization ratio, the better your credit score will be. That’s if all the other factors affecting your credit score, such as payment history, age of your credit accounts, types of credit used, and your total debt, are being managed well.
Should You Ask Then for a Credit Limit Increase?
Consider your unique financial situation if you’re wondering if you should ask a lender for a higher credit limit.
When To Ask For A Credit Limit Increase
As your financial life changes and improves, there will be natural times to ask for a credit limit increase. However, having access to more credit does not mean you need to spend that money. Remember, if you spend up to a new credit limit, you’ll be responsible for paying it back with interest.
- You Just Got a Raise. If a new job or promotion at work means more income for your household, you may benefit from a credit limit increase.
- You’ve Been a Reliable Customer. Credit card companies may reward you for being a reliable customer who pays your bills on time and manages your account well by offering a credit limit increase.
- Your Credit Score Is Within The Good Or Excellent Range. The better your credit score, the more business creditors want to do with you. Your reward for improving your credit score could be a credit limit increase. For example, a good credit score starts at about 690 and an excellent score at about 720 on a scale of 300 to 850.
Accredited Debt Relief offers debt resolution services to financially distressed consumers who want to eliminate debt without filing for bankruptcy.
Enroll in a custom program to help you become debt-free by negotiating and settling your unsecured debts like credit cards.
Consolidated Credit is a nonprofit with nearly 30 years of industry experience offering credit counseling services.
When To Wait To Ask For A Credit Limit Increase
There are times when it’s best to wait to ask for an increase on your credit limit.
- You Applied Recently for a New Line Of Credit. Multiple requests for more credit in a short period of time will have a negative impact on your credit score.
- You Requested an Increase With Another Creditor. Every request for increases from every creditor will be added to your credit history. Therefore, you may find it beneficial to stagger those requests over time.
- You’ve Transitioned to a Lower Paying Job. As your work-life changes, so too will your income for many different reasons. At times when you’re earning less than you previously did, it may seem like having access to more credit will help, but it could hurt you in terms of a lower credit score. If possible, wait until your income improves before asking for a higher limit.
- Your Credit Isn’t Good or Excellent. If your credit score is lower than you’d like, it may not be worth it to request a credit line increase. Any progress you have made improving your credit score will be lost, at least over the short term, if your request leads to a hard inquiry and your credit utilization ratio increases. A credit score between 580 and 670 is considered fair, and a poor credit score is below 580.
How To Become Eligible For A Credit Limit Increase
There are several steps you can take to become eligible for a credit limit increase.
Pay Your Monthly Statements On Time
It starts with paying your monthly bills on time. Creditors review your payment history when considering whether to offer you credit or increase the amount you can handle. If you are already having a hard time paying bills on time and can only make minimum payments, now may not be the right time for you to be looking for even more debt.
Monitor Your Credit Scores And Review Credit Reports
Just as creditors will do, you owe it to yourself to regularly monitor your credit scores and review credit reports from the three major credit bureaus: Experian, Equifax and TransUnion. It’s the best way to understand your credit situation, especially if you plan to request a credit limit increase. You can request free copies of your credit report, and you may also have free access to your credit score. Don’t be surprised when your credit score does not appear on your credit report or if your credit score varies among the three credit bureaus. This is because they weigh credit factors differently and use different formulas to calculate your score. Your credit report includes an overview of your financial history, with current and previous names and addresses; a list of your credit accounts, both open and closed; a debt summary, including credit cards, lines of credit, student loans, car loans and home loans.
Manage And Pay Off Your Debts
Managing and paying off your debts may sound easier than it is. You may have reached a point where you’re looking for help. That’s where professional debt relief companies come in. They can guide you through the process of paying off your debts faster than making minimum monthly payments or negotiating a lower total amount owed to creditors.
