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How to Increase Your Credit Limit
Key takeaways
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Exceeding your credit limit could result in declined transactions, fees, and penalty interest rates
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Going over your limit could negatively impact your credit score and future borrowing ability
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You might avoid over-limit issues by monitoring balances and setting up account alerts
The credit limit is the maximum amount of debt you can owe on the card at any one time, and it includes not only purchases but also interest and any fees you might incur.
The credit card issuer sets the limit when they give you the card. But it's not set in stone, and there are some good reasons you might want to increase it at some point.
This article will explore those reasons, along with how to request a credit limit increase, and when.
What is a credit limit increase?
The card issuer sets your credit limit based on a number of factors. These might include your credit score, payment history, income, other debts, expenses (rent, utilities, etc.), and disposable income.
A credit limit increase, as the term implies, raises the amount of your available credit and your ability to spend. There are two types: an automatic credit limit increase, which the card issuer provides without being asked, and a requested credit limit increase, which you have to ask for.
What are the benefits of increasing your credit limit?
A credit line boost has the potential to help you in several ways.
1. It could lower your credit utilization ratio
Credit utilization and credit limit are closely related. Credit utilization, usually presented as a percentage, tells you how much of your available credit you are using.
Credit utilization is one of the most important factors in calculating a FICO® credit score. It could account for 20% to 30%, depending on the scoring model. Many experts advise keeping credit utilization ratio at 30% or less.
A credit limit increase, which no corresponding increase in new spending, changes the ratio of your balance to your credit limit and thus lowers your credit utilization rate.
2. It could increase your spending power
Increasing borrowing power is another benefit of a credit limit increase. It might help you cover major purchases or emergency expenses.
However, boosting your borrowing power with a higher limit is a double-edged sword. Ideally, you can use that higher credit limit in a way that fits your budget and preserves or improves your credit score.
3. It could improve approval odds for future credit
Managing credit responsibly — maintaining a low credit utilization ratio, always paying bills on time — tells the card issuer you can manage a higher credit limit wisely. They may be so impressed that they eventually offer a credit limit increase without you asking for it.
4. It could enhance rewards potential
The appeal of a higher credit limit goes beyond greater spending power. Some of the top-tier, high-limit cards come with perks such as 2x to 5x points on spending, access to airport lounges, and annual travel credits.
How do I qualify for a high credit limit approval?
Factors that lenders might consider for a credit limit increase include:
1. Strong payment history
This is the single most important factor. It means no late payments, not just on your credit cards but also on rent, mortgage, utilities, and other bills.
2. Low credit utilization ratio
As we mentioned, using 30% or less of your credit is important, but a lower ratio — 10% or even 5% — is preferable. However, 0% credit utilization doesn't necessarily help your chances of a credit limit increase, because it could mean that little to no credit history has been established.
3. Stable or increased income
Credit card applications typically ask for your income, and from time to time, card issuers and banks may request updates. Remaining employed and showing higher income are pluses.
4. Good or improving credit score
On average, a decent credit score of 660 to 719 may qualify for a credit line of $2,800 when a card is first opened, according to the Federal Reserve Bank of Philadelphia. But a score of 720 or above might qualify for $7,400 or more.
5. Responsible use of your account
Card issuers generally analyze consumer behaviors to decide whether you qualify for a limit increase. They compare your behaviors, like paying more than the minimum every month, paying on time, and paying the balance each month, to other good cardholders when making their decisions.
How do I request a credit limit increase?
There are usually three avenues for requesting a credit limit increase.
1. Request a credit limit increase through your online account
On the credit card's website, look for a link to "credit limit increase." You might need to provide your current gross income, including nontaxable income, monthly rent, or mortgage.
The request may result in a hard inquiry on your credit report, which could temporarily lower your credit score, or a soft inquiry. A decision may take up to 30 days.
2. Call customer service
A customer service number usually can be found on the back of your credit card, as well as online and/or on your credit card statement.
This might be a good option if you want to explain special circumstances, such as an emergency purchase, that are prompting your request.
3. Wait for an automatic increase
Most issuers regularly reassess accounts to determine whether to increase credit limits. This usually takes place every six to 12 months.
When should I request a credit limit increase?
These are the signs you may be ready for a higher credit limit.
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Your income has increased
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Your credit score has improved
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You've had the account for at least 6 months
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Your credit utilization rate is low
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You have no recent late payments
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You've reduced other debt
Reasons a credit limit increase may be denied
A credit limit increase is not a sure thing. Here are some reasons a card issuer may deny your request.
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Your credit score is too low for more credit. As we noted earlier, higher credit scores tend to go with higher credit limits
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Your utilization ratio is too high. If you are close to your credit limit already, the issuer may decide against enabling you to acquire more debt
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You recently missed payments. Payment history is key to the decisions card issuers make
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You have high overall debt. Maybe your credit card usage is fine, but you have a mortgage, car loan, or student loans to manage as well
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Your income is insufficient. This may impact retirees or those entering the job market
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Your account is too new. Wait until your account is at least six months old before requesting a credit limit increase
Tips for successfully raising your credit limit
For the best chances of a credit limit increase:
1. Update your income annually
The card issuer will likely send reminders periodically to update your information.
2. Keep balances low before requesting an increase
A credit utilization ratio under 30% is generally considered to be good, but a lower ratio is even better. You can calculate this yourself on a per card basis or across all your credit cards.
3. Make payments on time
Set up reminders or automatic payments to make sure you're never late with a payment.
4. Use the card consistently
While using your credit card consistently, pay the balance each month or budget so that you can pay off the balance within a few months.
5. Consider opening an additional card
If your request is denied, wait six months and apply for a different card to increase your overall credit limit.
FAQs
It’s usually considered smart to wait until you have at least six months of on-time payment history before asking. Card issuers generally allow requests every six months.
If you’ve made the request and been denied, set up a reminder to try again in six months.
Don’t wait until you need more credit to ask for it. If you’re anticipating a large expenditure, you may want to ask in advance for an increase.
It could impact your credit score if the card issuer does a hard inquiry on your credit report to consider your request. It makes sense to find out first whether your request will result in a hard inquiry or a soft inquiry, which won't affect your credit score.
Credit utilization is calculated when the card issuers report balances to the credit bureaus each month. Your utilization ratio will drop when the new limit is reported, which may be reflected in your credit score in as little as 30 to 60 days.
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