How To Get a Credit Card Limit Increase?
What is a credit limit?
A credit limit is the total amount you are allowed to charge to your credit card. This includes not only approved credit card purchases, but also the entire balance owed, as well as balance transfers, interest charges, and fees such as annual fees and late fees.
With most credit cards, your credit limit is determined based on your creditworthiness at the time you apply. Card issuers determine your creditworthiness based on your credit score, but they may also use other factors, such as your reported income, your current balance and payment history.
How do credit card limits work?
Suppose you were approved for a credit card with a $5,000 credit limit, and your balance is currently $3,500. You can make a purchase of up to $1,500, but then you’ll run out of your credit limit.
After that, you probably won’t be able to make any further purchases until you pay off your balance. And if you tried to make a new purchase over $1,500, it would likely be declined.
However, sometimes a charge goes through and puts you over your credit limit. If this happens, the card issuer may charge you a fee. In addition, they may raise your interest rate for a few months or permanently, or even close your credit account, especially if it happens more than once. That’s why it’s important to know your credit limit by checking your credit card statement regularly.
How to increase your credit limit?
When you first get a credit card, your credit line may not be as high as you’d like it to be. Once you’ve had the card for some time and have been using it properly, you’ll have a chance to request a credit limit increase. An increase in your credit limit not only improves your purchasing power, but also lowers your credit utilization ratio — assuming you keep the same balance or pay it down.
Many credit card issuers review accounts periodically, usually every six months, and automatically raise the credit limit for cardholders who meet their criteria.
If you think you have a good reason for a credit limit increase, you can request it online. Most card issuers have a menu option to request a credit increase once you log into your account. Generally, it takes just a few clicks to submit your information, or you may even get an instant approval. Other times, you may need to provide additional information, which issuers may take into consideration while evaluating your request.
You can also call the number on the back of your card and ask a customer service representative whether you’re eligible for a higher credit limit. Speaking with a rep will allow you to provide additional information beyond what is available through online forms. You may also want to make your request by phone if you have an urgent need for extra money, such as a large, imminent purchase.
If you have a secured credit card, you can typically raise your credit limit by paying more towards your security deposit. The best way for increasing your credit limit on a secured credit card is to call the card’s customer service to find out the exact steps to take, as they can vary by issuer.
When to request a credit limit increase?
When you request a credit limit increase, you will need to show the issuer a compelling reason to raise your line of credit. Graduating or applying for a job is a great time to ask your issuer for a higher limit. Getting a pay raise or transitioning to a new, higher-paying job are also signs that you may qualify for additional credit access.
Does requesting a credit limit increase hurt your credit score?
Once you request a credit limit increase, issuers may pull an updated copy of your credit report. This inquiry will become part of your credit record and often makes a small, temporary ding to your score.
However, if your request is approved and your credit limit is increased, you will have more available credit and potentially lower your credit utilization rate. So, in the long run, a credit limit increase may actually improve your credit score.
If your request isn’t approved this time, the card issuer will notify you about their decision, usually via email.
A credit limit increase may be denied for several reasons. Your account may be too new, it may have been too little time since the last credit limit change, or your income may be too low to make you eligible for an increase. In addition, negative information in your credit report can lead to your request being denied.
In this case, you will receive an email explaining the factors, which could include recent delinquencies, high credit balances, etc. Pay attention to the reasons listed in the email and try to improve your credit in those areas, wait a few months, and then try again.
How often can you request a credit line increases?
Although each lender has its own criteria for granting increases, only established cardholders can expect to receive one. If you’ve been approved for a credit increase, you can request another in as soon as six months.
After being denied, you should probably wait longer before submitting an additional request, and instead focus on good credit habits that will help improve your credit score, such as paying off balances and making all payments on time.
Alternatives to the credit line increase
If you have a good payment record with your existing lines of credit, and your credit is in good shape, you may be approved for a new line of credit. Even if the limit on the new card isn’t higher than the current one, it may still increase your overall available credit.
To summarize, raising your credit limit requires a review of your financial situation and some preparation, but at the same time, paying your credit card bill in full and on time every month coupled with an increase in your credit limit can give a great boost to your credit score.
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