When Should You Ask for an Increase to Your Credit Card Limit?

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When Should You Ask for an Increase to Your Credit Card Limit_Man talking on the phone while multitasking with his two young daughters

Asking for a credit limit increase can give you more spending power and financial flexibility to help keep your overall utilization rate low as you take on additional debt. Before you ask for an increase in credit, you should understand what factors creditors use to determine your limit and what effects the request may have on your personal finances. Here’s what you need to know before you start a conversation with your lender.

What is a credit limit?

Your credit limit is the maximum amount that you can spend within your line of credit. Credit limits are most commonly associated with a credit card but can apply to any revolving line of credit. Along with your interest rate, your credit limit is usually one of the first things you’ll learn when you’re approved for a new card. Your ability to afford the line of credit and your credit history will be key factors in determining the details of any credit card offers that you receive. You can find your current credit limit on your monthly statements.

How do creditors determine if you qualify for an increased limit?

Your credit limit is determined by several factors, including your:

  • Credit score
  • Credit utilization
  • Payment history
  • Age of accounts
  • Monthly income

When you first apply for a credit card, the issuer will use your overall credit history to determine your creditworthiness, as well as your ability to and likelihood of making consistent and timely payments. If you qualify for credit but have limited credit history or are repairing your credit, you may be offered a low initial credit limit. As you build a history of credit use and make your monthly payments, you will be more likely to qualify for a limit increase as your history improves. Essentially, the actions you take to get and maintain a good credit score will also help you earn a credit increase as you prove to lenders that you can make good on debt obligations.

Does it hurt your credit score if you’re denied a limit increase?

Asking for a credit limit increase may impact your credit score and being denied the increase could have a negative effect on your credit score. It’s helpful to know the difference between hard and soft inquiries, also known as credit pulls:

  • Hard inquiries occur when a creditor or lender pulls your credit report to make a decision about whether or not to extend a line of credit to you. This inquiry appears on your credit report and may have an impact on your score for up to two years.
  • Soft inquiries occur when you check your own report or a lender reviews your report to pre-approve you for an offer. These inquiries do not appear on your report and have no effect on your score.

If you’re considering asking your lender for a credit increase, discuss the process with the card issuer to determine if they need to do a hard or soft inquiry to make their decision, as this can vary from one lender to the next. Additionally, multiple hard inquiries in a short time period may have a negative impact on your credit score.

Does your credit limit increase automatically?

If your account is in good standing, you have a long history of making monthly payments on time and you regularly pay off your credit cards in full, your credit limit may increase automatically. Again, this depends on the card issuer. Some issuers will periodically review accounts and increase credit limits. If your credit report is frozen, it may not be possible for your card issuer to review your score to adjust your limit.

Is it a good idea to ask for a limit increase?

Increasing the amount of credit available to you can have a number of benefits. First and foremost, additional credit means increased buying power. You’ll have more flexibility for making big purchases and additional security for making frequent purchases. However, if you can’t pay off a higher monthly credit payment, then increasing your credit limit may not be in your best interest.

In addition, more credit means that your credit utilization ratio is likely to decrease, or remain the same if you intend to increase debt, which in turn can help improve or protect your credit score. While a hard pull and increased line of credit may lower your score in the short term, as you continue to meet your debt obligations and manage debt responsibly a credit increase can have long-term benefits—especially if you’re able to keep your total credit utilization rate below 30%.

What’s the best time to ask for a credit limit increase?

The best time to ask for a credit line increase is when you need or anticipate needing additional credit. A good rule of thumb is to only apply for credit that you need and can afford to repay. You should also wait until the account is at least six months old, as a gradual increase in your overall credit profile will improve your chances of being approved since you will have the opportunity to prove that you can handle each new line of credit. If you’re considering asking for a credit increase, ensure that you:

  • Need the additional credit to make large or ongoing purchases
  • Have proven that you can make payments on time
  • Have recently increased your monthly income or can otherwise afford additional debt obligations
  • Are comfortable with your current payments, but your credit utilization rate is over 30%

Alternatively, you may want to rethink asking for a line increase when:

  • Your credit score is fair or worse
  • You’ve been declined for other credit within the last 4-6 months
  • You’re unsure if you can afford to repay the potential debt increase
  • You’ve recently opened other lines of credit

If you’d like to learn more about how credit scores are calculated, we’ve got you covered with our free eBook: Navigating Credit Reports & Understanding Credit Scores.

Evaluating your credit report and new credit opportunities can help you stay on track to meet your financial goals. Getting a credit limit increase isn’t the only way to gain more spending power—check out our guide on more money questions you should be asking.

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