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Tips to Increase Credit Limit

Have you ever had your credit card declined when trying to pay a bill? You may have come close to maxing out your credit limit. This reflects how much a card issuer may be willing to let you borrow, based on factors like your income and your credit history.

 

Applying for an increased credit limit could be a good option if you want to boost your purchasing power. However, you should only do so if you are able to pay off the balance or at least the minimum monthly payments. Here are some tips on how to increase your credit limit.

December 24, 2020 in Learn

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How to increase credit limit

Consider the following four ways to increase your credit limit.

Wait for a credit card limit increase

If you frequently use your credit card and consistently make monthly payments on time, you may not even have to apply for an increase. Some credit card issuers may offer you an increased credit limit after a certain period of time. If you have an American Express Card, you will have to consent to the credit card limit increase before it is applied to your account.

Request for a credit limit increase

You could make the request online or over the phone by calling the customer service number on the back of your card. Keep in mind that a request could result in a hard credit inquiry, which might slightly impact your overall credit score.

 

The most effective time for requesting an increased credit limit is after you have been a cardmember for a period of time. Ideally by then you would have a solid track record of managing your debt responsibly and making payments on time. If you have had an increase in your income, that could strengthen your case as a creditworthy borrower.

Apply for a new credit card

Another way to boost your purchasing power is to apply for a new credit card. Having a second card, even if it carries the same credit limit as your existing one, will still increase the total amount of funds you can access. Consider getting a credit card with a rewards program or that offers a welcome bonus. Being more strategic with the type of card you apply for could help you earn rewards on your purchases.

When should I increase my credit limit?

Lenders want to be assured that you can pay back what you borrow. A good time to request a credit limit increase might be if you can show an increase in your income.

 

You should also have had a long enough history with your credit card issuer to show you are a responsible user who makes payments on time. Keep in mind your purpose for getting a credit limit increase. If you do get an increase, that doesn’t mean you should go on a shopping spree.

Benefits of an increased credit limit

One of the benefits of increasing your credit limit is being able to improve your credit utilization ratio. If you raise the amount of credit you can access but keep your spending at the same level or less, you will lower your credit utilization ratio, which could help your credit score. With a higher credit score, you may be able to access lower interest rates and better terms on future loans, such as a mortgage.

 

A credit card limit increase allows you to make larger purchases more easily. It can ensure your access to credit in case of emergency, like unexpected car or home repairs.

Drawbacks of an increased credit limit

One drawback of increasing your credit limit is you risk overspending. Treating yourself and loved ones may be too tempting to resist. As a result, you might dig yourself into a deeper hole of debt. Your credit card can be used to help you set up and stick to a budget so that you spend and manage debt responsibly.

 

Another disadvantage of increasing your credit limit could be the impact on your credit score. Although most creditors only do a soft credit inquiry for existing customers before increasing their credit limit, if a hard credit inquiry was pulled to approve your increase, your credit score could be affected negatively in the short-term.

How to improve your chances for a credit limit increase

Your request to increase your credit limit is never guaranteed. However, you can improve your chances of approval if you can demonstrate the following:

■ Show you have been a cardmember for a period of time

■ Demonstrate a history of making monthly payments on time

■ Have proof of income

■ Have a satisfactory credit score

■ Don’t carry too much other debt

How to request a credit limit increase on your American Express Card

To request a credit limit increase on your American Express Card, log into your account and navigate to the credit limit increase request form or simply call the number on the back of your Card.

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