Credit limit increases are often touted as an easy way to improve your credit score. They can also make it easier to make large purchases – or simply offer peace of mind that you can cover emergency expenses should something go awry.
But what exactly is a credit limit increase, and how do you get one? This blog unpacks how to get a credit limit increase, and how to use yours wisely.
What is a credit limit increase?
A credit limit increase bumps up the maximum amount you’re allowed to spend on a credit card. Lenders may grant a credit limit increase at the account holder’s request. They may also increase your credit limit automatically if your account remains in good standing for a long period of time.
How does a credit limit increase affect your credit score?
A credit limit increase can affect your credit score by improving your credit utilization ratio. Credit utilization refers to the amount of debt you carry compared to your total credit limit. Credit utilization accounts for up to 30% of your credit score – which is why a credit limit increase can give your score a boost.
Most experts recommend keeping your credit utilization rate below 30%. With a lower credit limit, it’s easier to extend a greater percentage of your total available credit. Imagine you have a card with a $1,000 credit limit and $400 balance. If your credit limit increases to $2,000, your credit utilization rate will drop from 40% to 20%. As a result, your score will likely improve.
On the other hand, a higher credit limit means you can accumulate more debt. In the example above, you can now spend twice as much before you max out your credit card. This comes with a catch: if you carry a higher balance, you’ll pay more each month in interest. This can stick you on a treadmill of debt that ultimately harms your credit score.
Before requesting a higher credit limit, be honest with yourself about your financial reality. If you’re ready to handle the extra responsibility – read on to learn how to get a credit limit increase.
Explore: Is a credit limit always good for your score?
How to get a credit limit increase
Figuring out how to get a credit increase is usually a straightforward process. Here are four ways to access a higher credit limit:
- Request through an app or online portal: Most lenders make it easy to request a credit limit increase through your customer account. Log on to your credit card app or online portal and look for an option to apply. You may need to verify or update personal information like your current income and monthly rent or mortgage.
- Call your credit card issuer directly: Make a call to your credit card company’s customer service hotline. A customer service representative can help you determine whether you meet the base requirements for a credit limit increase. If you’re a good candidate, you may even be able to apply right over the phone.
- Use your card responsibly for automatic increases: If your current account remains in good standing for a long period of time, your lender may raise your limit automatically. Pay your bill on responsibly, keep your balance low, and your overall credit in good shape – and you may get a credit limit increase just because.
- Open a new credit card: For various reasons, you may not be eligible for a credit limit increase through your current card. You may, however, be eligible for a similar – or slightly better – offer on another card. Opening a new card can improve your overall credit utilization rate and total available credit.
Explore: What to do if you need a credit limit increase
When should I request a credit limit increase?
The best time to request a credit limit increase depends on the lender, borrower, and the credit card account. A strong credit score, steady income, and track-record of using your current card responsibly all improve your approval odds. Here are five factors to consider:
- Your current income: if your income has increased since you opened your card, you’re more likely to be approved for a higher credit limit. If your income has decreased or stayed the same, it’s not a deal breaker – but you may want to request a more modest maximum limit.
- Your current credit score: you’ll have a better chance of getting approved if your credit score has improved since you opened your card. If you have any negative credit history on your report, take care of it before you apply to give your score a boost.
- Age of your current account: as a rule of thumb, wait six to twelve months before requesting a credit limit increase on a new card. That’s because your lender has already evaluated and made a decision on how much credit they’ll grant you. Ask too soon, and your credit situation will still be the same.
- Your recent credit history: your lender will check your credit report to get a feel for your current financial circumstances. Things like high credit utilization, recent late or missed payments, and collections accounts all indicate you’re not in a great position for a credit limit increase.
- Recent credit inquiries: if you’ve recently opened or applied for new credit, you may want to wait to request a credit limit increase. Multiple recent credit inquiries suggest you’re financially strapped, and can also cause your score to drop.
How long does it take to get a credit limit increase?
There’s no set timeframe for how long it takes to get a credit limit increase. You could be approved immediately, or the lender could take up to a month to review your request. In general, expect to hear back within ten business days. If your credit card issuer approves your request, you’ll usually have access to the additional funds immediately. It may, however, take several weeks for your new credit limit to show up on your credit report.
What to do if you’re approved for a credit limit increase
A credit limit increase means your lender has faith in your “creditworthiness.” It’s important to be aware of common pitfalls, however – and how you can use your new borrowing privileges to improve your credit. Here’s what to do (and not to do) if you’re improved for a credit increase:
- Don’t increase your spending: a higher credit limit doesn’t mean you should buy more stuff. Just like with your initial limit, you’ll want to budget and spend only what you can afford. Otherwise, you can get stuck in a cycle of struggling to pay more than your interest and minimum payment.
- Keep a low balance and pay in full: you’ll likely see your credit score jump shortly after getting approved. Work to keep your credit utilization below 30% and pay off your balance in full every month. This helps maintain your higher score and avoid paying interest.
- Don’t close older cards: credit age is an important factor in your credit score. You can switch your spending to newer cards with higher credit limits and lower interest rates – but don’t close old cards (unless they have exorbitant annual fees).
- Leverage the credit benefits: While your score may drop slightly initially, it should bounce back even higher once you get a credit limit increase. This is a good time to tap into the benefits of good credit, like asking for lower interest rates or refinancing your mortgage or automobile loan.
What to do if you’re denied a credit limit increase
There are many reasons you may be denied a credit limit increase. Fortunately, you can fix most of them with time and a little effort. If you get denied, call customer service – they may suggest you re-apply and request a smaller increase. Otherwise, it’s best to wait at least six months before trying again. In the meantime, you can focus on improving your credit history and approval odds.
Explore: 6 Strategies to Improve Your Credit Fast
Common reasons a credit limit increase is denied
A credit card issuer may deny your request if your account activity, income, or overall credit history doesn’t meet their approval standards. Common reasons a credit limit increase is denied include:
- You’ve recently opened the card
- You have recent missed payments or major delinquencies
- Your credit score is too low
- You’re close to your card’s current credit limit
- You’re making small or minimum monthly payments
- Your monthly income is insufficient
- You’ve recently opened or applied for new credit
Can you build credit if you have a low credit limit?
Used wisely, high credit limits are a great way to improve your credit score. But you can still build credit with a lower credit limit. Start by using your current credit accounts responsibly: pay on time, keep your utilization low, and take care of any negative information on your report. Tools like StellarFi can help improve your credit history even faster.
With StellarFi, you can build credit using the bills you pay each month already. Simply link your existing expenses, like your rent, phone payment, and even subscriptions like Spotify or Grubhub. StellarFi pays on your behalf and reports your positive repayment history to the credit bureaus. StellarFi improves 100% of the factors that make up your credit score – including your credit utilization rate.
Signing up is easy, and there’s no credit check. Become a StellarFi member today!