What Should You Know Before Increasing Your Credit Limit?

Updated October 6, 2023

You will get some useful benefits and boost your credit rating if you get approved for a higher credit limit. The request for a credit limit increase may be approved straight and you get quick money now, but also, it may be approved within several days or even be denied.

You have the right to choose how much of a credit limit you are willing to request. The response may depend on the client’s credit rating, income, as well as account history. Here is what you should know before you increase your credit limit.

What Is a Credit Limit?

Increasing Your Credit Limit

What is the credit limit? This is the maximum sum of cash you may spend before you need to repay some of your credit card’s balance. Depending on the client and the credit card, the balance may range from several hundred dollars to tens of thousands of dollars.

Why is this limit important? The credit limit may not only affect your ability to spend your funds but it may also affect your rating. Luckily, we’ve got the news that you may use the credit limit to your advantage and control it. Keep on reading to learn how to boost your credit limit and how its increase may improve your credit score.

Why Is Credit Limit Important?

Crediting companies review the credit report and rating of the borrower before they make their lending decision. They want to check your creditworthiness and responsibility when it comes to lending so they get the credit reports from the main credit reporting agencies: TransUnion, Experian, and Equifax.

The credit report tells them about your current credit rating and how well you coped with the previous debt repayment. The payment history of the borrower comprises a big part of their rating.

Hence, it’s essential to pay your bills on time. If you have missed or late payments, it will show up on your credit report and damage your rating. Another big portion of your credit score comes from the credit utilization ratio. This is the percentage of the total credit card balances compared to the total credit limit. According to Experian, it is commonly recommended to keep the total credit utilization rate below 30%.

A lower credit utilization ratio can positively influence your credit rating. Here is an example of how it works. If you have a credit card with a $4,000 limit, and the balance is $2,000, the credit utilization ratio is 50%. To lower this ratio, you may repay your credit card balance and also save on interest.

However, if you can’t afford to repay the balance on your card in full, you may either request a credit limit increase or apply for a new credit card. Therefore, your credit limit is important when it comes to your credit rating as it may affect your score and credit utilization ratio.

Credit Limit Important

How to Obtain a Higher Credit Limit

Here are two methods of how you may boost your credit limit: you may either request an increase or wait for an automatic boost.

Option 1: Request a credit limit increase

Are you willing to get a credit limit increase faster? Then you may contact your credit card issuer directly and request it yourself. The service provider can include a request link in your online account.

You may also initiate a request by calling customer service. Keep in mind that if you request a credit limit increase, it may affect your rating as the provider will conduct a hard inquiry on your credit report. It means the creditor will review the credit of the client with one or all three credit reporting agencies to make their lending decision.

A hard inquiry is dangerous for borrowers and it may lower their scores. Fortunately, an automatic credit limit increase doesn’t usually create a hard credit pull on your report.

Once you submit a web request, the credit card provider will offer you any of the following:

  • Credit limit increase for a smaller sum.
  • Agree with your request to increase the credit limit.
  • Deny your request for a credit limit increase.

In case your request was rejected, you will need to wait for some time before you try again. Experts recommend consumers wait for about 6 months to protect their credit rating.

Option 2: Wait for an automatic credit limit increase

Another method is to wait for the credit card company to boost your credit limit automatically. You won’t need to place a special request or do anything. In case you are a responsible borrower and use your credit card wisely, you may be offered a higher credit limit every 6 to 12 months. To boost your chances of getting this automatic credit limit increase, you may:

  • Use your credit card more often. It will generate swipe fees for the bank. You won’t be offered an automatic limit boost if you use your card occasionally.
  • Build a positive payment history, and make sure you make on-time payments.

The Benefits of Higher Credit Limit

Lower credit utilization. You will be able to decrease your credit utilization ratio even if you can’t afford to repay the card balance right now.

Higher credit rating. The lower your credit utilization ratio, the higher your credit score will be.

More purchasing power. You will gain access to additional funds so it will boost your purchasing power. Don’t forget to keep a low balance on your card so that your credit utilization ratio doesn’t increase.

Future financing. When you have a higher credit limit and you utilize it with responsibility, you will increase your credit rating and lower your credit utilization ratio. What does it mean? A higher limit will help you qualify for more flexible and affordable lending terms and lower interest rates when you need additional cash in the future.

The Bottom Line

Having a higher credit limit can be beneficial for consumers. This option may help them boost their credit scores and lower their credit utilization ratio. It’s an essential step for those borrowers who want to build their credit and have more purchasing power. You may either wait for an automatic credit limit increase or request this boost yourself.

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