Your credit limit is the maximum amount you can charge on a revolving credit account, like a credit card. It’s also an important part of your credit score because it’s one of the things that define your credit utilization rate.
👉 Your credit utilization rate is the percentage of your credit limit that you actually use. If you have a card with a $1000 limit and your balance is $300, your credit utilization is 30%.
Your credit utilization rate can count for as much as 30% of your credit score. Keeping your credit utilization rate below 30%, or lower if you can, will help your credit score.
Raising your credit limit lowers your credit utilization rate. If you have a card with a $1000 limit and a $500 balance, your credit utilization rate is 50%. That’s too high. A credit limit increase to $2000 will give you a decent credit utilization rate of 25% with the same balance.
If you’re having a hard time keeping your credit utilization rate low at your normal spending rate, a higher credit limit can help.
If you need a quick boost to your credit score, a higher credit limit can be a fast way to lower your credit utilization rate.
A credit limit increase can help your credit score. It can also hurt your finances if you are tempted to spend more money.
Let’s explore how to increase your credit limit, and the most important things to consider before you do.
Pros and Cons of Increasing Your Credit Limit
Think about why you want to increase the amount you can borrow. While getting a higher credit limit can help you, it can also be harmful. Here’s what to consider before making your final decision.
👍 The Benefits of a Higher Limit
Flexibility
The main reason people want to increase their credit limit is, of course, the added wiggle room.
Increasing your borrowing room makes sense if you frequently make large purchases. For example, business owners that charge large business expenses on their credit cards often benefit from having higher limits. Sometimes your old limit simply doesn’t fit your lifestyle needs anymore.
Whatever the reason is, if you’re financially responsible and pay your credit card bill on time each month, a higher credit limit gives you that extra flexibility you need.
Boost Your Credit Score
Asking for a higher credit limit is a quick way to improve your credit score. A higher limit reduces your credit utilization ratio, the amount of available credit you’re using at any given time.
An Emergency Cushion
Knowing you have access to funds in case of an emergency gives you peace of mind. Say you’re traveling and you need to change your plans at a moment’s notice. Instead of being stranded, you can rely on your credit to safely return home.
👎 The Disadvantages of a Higher Limit
It Can Increase Your Spending and Debt
Access to credit does give you flexibility, but beware: it can be extremely tempting.
Increasing your limit can push you further into debt, especially if you’re currently carrying a balance on your card or credit line. According to a Citizens Advice UK survey, 1/3 of people who received a credit limit increase increased their spending afterward. If you’re already struggling financially, applying for a credit increase often makes things worse.
The reason for this is something called psychological ownership: looking at credit as money you own or will own at a future date, instead of borrowed funds. The more access you have to it, the more tempting it is, especially for those with a history of bad financial habits or a credit card addiction.
It Can Hurt Your Credit Score
An application to increase your credit limit can be harmful to your credit score. Many lenders do something called a hard pull when you ask to bump up your limit.
A hard pull is when a lender requests to look at your credit file to determine if you’re eligible for a limit increase. Every hard pull shows up on your credit report. Too many hard pulls in a short period can make you look like a risky borrower.
When Is the Best Time to Ask For a Limit Increase?
Timing is important. Let’s take a look at the best times to ask your lender to up your limit.
You Have a Strong Credit Score
If you have a very good to excellent credit score (740 to 850), your chances of getting approved are looking pretty good. Similarly, a good credit score between 670 and 739 lets your lender know that you can handle borrowed money. If you’re not sure what your score is, get a free credit report and find out.
You’re Earning a Higher Income
A higher income increases your chances of getting approved because it indicates that you have greater financial security. Just make sure you update your new income with your credit card issuer before you apply.
When Is the Worst Time to Apply?
As tempting as it is, you should avoid applying for a credit limit increase in the following situations:
- You have a low credit score
- Your credit is already maxed out
- You’ve recently applied for a credit card or limit increase
- You have a bad track record of missed payments or going over your credit limit
- If your account is less than 6 months old
Having that extra access to credit may seem like a good solution in these situations, but you’re most likely not going to be approved. You might actually hurt your credit score if your lender does a hard pull.
Ways to Increase Your Credit Limit
There are two ways to increase your credit limit. Let’s take a look at both so you can decide what’s best given your unique situation.
Automatic Limit Increase
When you have a good track record, your credit provider usually increases your credit card limit automatically. A good track record usually means making payments on time, paying off your full balance each month, and not keeping a revolving balance on your card.
Lenders usually pre-approve you for a limit increase once or a couple of times a year, depending on your profile. This is a great way to increase your limit because it doesn’t require an application on your part or a hard pull on your credit report.
If you’re a responsible credit card holder and want to increase your limit but aren’t in a rush, the best thing to do is wait until your card issuer automatically bumps up your limit.
Request a limit increase
The second way to increase your credit limit is to ask your lender for one. The best ways to do it are online or over the phone. To make your life easier, we’ll tell you how to use each method with three of the most popular credit card providers in the US.
Before You Request a Limit Increase
Your credit limit increase request will be processed automatically using an algorithm. The decision won’t be made by a person. These are some of the factors that will be considered.
- Your balance and payment history on the card.
- Your credit score and credit report.
- Your income and debt-to-income ratio.
Some issuers will use a soft credit check when you request an increase, which will not affect your credit score. Others may use a hard inquiry, which will affect your credit. Try to find out which before you make a request.
Before you request a limit increase, take these steps.
- Check the date of your last limit increase. Most issuers will only increase a credit limit once every six months.
- Check your own credit score and report. If your score has decreased and your credit report has recent negative entries a request is likely to be denied.
- Have proof of income or change in income ready in case it is requested.
- Honestly evaluate your financial status. Do you believe that you can handle a higher credit limit?
If you don’t think you’re ready for a credit limit increase, there’s a good chance that your card issuer will feel the same way!
How to Increase Your Credit Limit With Major Issuers
Requesting a credit increase is easy. With most major issuers you can do it online or over the phone.
How to Increase Your Credit Limit With Citi
Online
This is the easiest way to request a limit increase with Citi. Once you’ve logged into your Citi online account, follow these simple steps:
- Click “Credit card services”, located under the “Services” tab
- Once you’re there, select the option “Request a credit limit increase”
- Enter the information required (like your income or monthly mortgage payments and click submit.
You should find out right away if you were approved or not.
Over the phone
You can also speak to a Citi representative over the phone. This alternative is useful if you’re not an online banking user or you would like to ask for a bigger credit limit increase. They will most likely ask you for details about your income or monthly payments so be sure to have those handy. Call the service number on the back of your card.
How to Increase Your Credit Limit With Chase
Over the phone
The only way to ask for a credit limit increase with Chase is by calling the customer service number on the back of your card. A Chase representative will ask you a few questions, including your income and employment status. You’ll also be asked how much you want to increase your limit, so be prepared.
Once they have all the information, it will only take a few minutes to find out if you’ve been approved or not.
How to Increase Your Credit Limit With Capital One
Online
Similar to Citi, Capital One’s online application system is the most efficient way to increase your credit limit. Here’s what to do:
- Log into your account and click on “Services”
- Once you’re there, select the “Credit line increase” option
- Fill out the form. You will need to provide your employment status, income, your monthly credit card spending, and your monthly rent or mortgage payments.
- Click submit and you’re done!
You may have to wait a few days to find out if you’ve been approved.
Over the phone
If you’d rather call in or don’t have access to online banking, you can also contact the customer service line. Chase gives you the option to submit a request using an automated system instead of speaking to a customer service agent.
What if I’m Denied?
Your lender may decline your limit increase request if they consider lending to you risky at the moment. Try to improve your financial health by:
- Paying off your debt
- Making payments on time
- Using your credit card wisely
- Checking for errors on your credit report
Don’t re-apply for an increase over and over. Multiple credit pulls can seriously hurt your credit score.
Consider Another Card
Another way to decrease your credit utilization is to apply for another card. Your credit utilization is computed based on the total limit of all your cards, so a new card with a new limit will increase your total.
Credit scoring models also consider the utilization of each card. Spreading your purchases across two cards can improve this.
For example, if you have a card with a $5000 credit limit and a $3000 balance, your credit utilization is 60%, which is too high.
If you got a second card with the same limit, your total credit limit would be $10,000, so your credit utilization would drop to 30%. You’d still have 60% utilization on one card, which could hurt your credit.
If you split your purchases so you had a $1500 balance on each card, your credit utilization would be 30% on each card, which is better for your credit.
Of course, your best bet is to pay those balances off!
If you look for another card, consider one that complements your existing card. If you have a general-purpose card, consider a rewards card focused on your most common purchasing categories.
Getting a new card carries risks. Don’t let another card tempt you into spending more!
Think Carefully Before You Increase Your Credit Limit
A higher credit limit can be useful when your spending habits change. It can also improve your credit score and give you peace of mind in case of an unexpected life event.
However, if you’re struggling financially, you should ask yourself if a limit increase will help your situation or make it worse. Consider alternative solutions like financial therapy or budgeting instead.
