This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.
Your credit score is impacted by your credit limit. Learn the pros and cons of a credit limit increase and how to get one.
Image source: Getty Images
When you’re managing a credit card, it’s important to track your credit limit and keep a low credit utilization ratio. One way to improve your score and reduce your ratio is to ask for a credit limit increase. But what happens when you ask for one? Here are the steps of asking for an increase, what happens during the process, and the benefits and drawbacks of getting one.
How your credit limit affects your credit score
Your credit limit is based on your credit score, your income, expenses, and other factors. The credit card company sets it when you first apply for your card.
Save: This credit card has one of the longest intro 0% interest periods around
More: Save while you pay off debt with one of these top-rated balance transfer credit cards
Your credit score is a reflection of your credit utilization ratio, which is the amount of credit you have available versus how much you’re using. It makes up 30% of your credit score.
By asking for a credit limit increase, you’ll have more credit available. As long as you don’t increase your credit card debt, this can reduce your credit utilization ratio and improve your credit score.
The process of asking for a credit limit increase
To ask for a credit limit increase, you’ll need to contact your credit card company directly. You can either call the customer service number on the back of your card or send a message through your online account.
Some companies may allow you to request a credit limit increase through a mobile app. When you ask for a credit limit increase, you’ll need to provide some information about your current income and expenses to help the issuer determine whether you are eligible for a credit limit increase.
Your card company may periodically increase your limit if you consistently spend responsibly and pay your bills on time. It’s important to note that major card issuers typically wait at least six to 12 months before automatically raising your credit limit.
The benefits and drawbacks of getting a credit limit increase
In addition to improving your credit utilization ratio, a higher credit limit can give you increased purchasing power and flexibility in case of an emergency.
However, there are also drawbacks to getting a credit limit increase. You may be tempted to use more credit, which could increase your debt and interest payments. Additionally, a credit limit increase can temporarily decrease your credit score if the bank requests a hard inquiry on your credit report.
What to do after you get a credit limit increase
If you’re approved for a credit limit increase, it’s important to keep track of your credit utilization ratio and spending habits. Even though you have more credit available, it’s still important to keep your spending in check to avoid unnecessary debt.
You may also want to set a goal to pay off your credit card balance each month to avoid interest payments.
What if you’re denied a credit limit increase?
If you’re denied a credit limit increase, don’t panic. You can ask the bank for a reason why your request was denied. Common reasons for denial may include a low credit score, a high debt-to-income ratio, or recent late payments.
If you’re denied, focus on increasing your income, paying off your current debt, and improving your credit score before asking again. Credit card companies have different requirements, so you can also choose to open up another credit card if you need more flexibility and want to increase your credit utilization ratio.
Getting a credit limit increase can be a useful tool for managing your finances and improving your credit score. However, it’s important to understand the process and potential drawbacks before requesting an increase. By keeping track of your spending, paying off your balance, and understanding your credit score, you can make informed decisions about when and how to ask for a credit limit increase.
Alert: highest cash back card we’ve seen now has 0% intro APR until 2024
If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
