Have you received an offer from your credit card company to increase your credit limit? Or maybe you’re looking for more spending power than your card issuer is offering?
There are several reasons why an increase in your credit limit could be a benefit. And getting one is not as complicated as you might think.
But are you a good candidate for a credit limit increase?
In this article, I’ll walk you through the ways that you can achieve a credit limit increase, as well as the details on what the increase could mean for your financial life.
Table of Contents
- What Is a Credit Limit Increase?
- Why Did I Receive a Credit Limit Increase?
- How To Request a Credit Limit Increase
- Why a Credit Limit Increase Matters
- Tips for Maintaining Your Credit Limit
- Pros and Cons
What Is a Credit Limit Increase?
Let’s start with the basics.
A credit limit increase is when a credit card issuer raises the maximum amount of credit available to a cardholder. In other words, it is an increase in the amount of money that the cardholder can borrow or spend using the credit card.
A credit limit increase can be granted by the card issuer for various reasons, including an improvement in the cardholder’s credit score or a request by the cardholder for a higher limit.
A higher credit limit can provide cardholders with more purchasing power and flexibility, but it also carries the risk of increased debt if not managed responsibly.
Why Did I Receive a Credit Limit Increase?
You may have received a notice from your credit card issuer about an increase to your credit limit, even if you didn’t ask for one.
Don’t panic. Automatic credit limit increases are possible. And they don’t require a hard inquiry on your credit report, so you shouldn’t see an adverse impact to your credit score.
Since you’re an existing customer, your card issuer can evaluate your financial profile via credit monitoring services and also your behavior with their products.
As a result, they may have identified you as a candidate for a credit limit increase based on a combination of some of the following factors:
- Consistent On-time Payments: If you’ve consistently made on-time payments and haven’t missed any payments in the past, your credit card issuer may have taken notice.
- Length of Credit History: As you establish a longer credit history with your credit card issuer, they may see you as a more reliable borrower and offer you a credit limit increase.
- Good Credit Score: If you have a good credit score and haven’t had any negative credit events, such as late payments or collections, your credit card issuer may consider you a low-risk borrower and increase your credit limit.
- Credit Utilization: If you’ve been using a significant portion of your available credit limit but have been paying off your balances in full and on time, your credit card issuer may increase your credit limit to accommodate your spending habits.
- Higher Income: If you were prompted to update your income information during a recent visit to the card issuer’s website, you may have unknowingly helped trigger this increase. If you have received a raise or started a new job with a higher salary, this could prompt a credit limit increase.
Chase, which is one of the top credit card issuers in the United States, says that paying your bills on time and paying more than the minimum are two of the factors that could make you a candidate for a credit limit increase.
How To Request a Credit Limit Increase
If your card issuer has not offered you a credit limit increase, you can ask for one anyway.
You can use one of these two methods to request an evaluation of your eligibility:
- Call the number listed on the back of your credit card to speak with a customer service representative. They will walk you through the steps required for an evaluation.
- Use your card issuer’s online portal or mobile app to request a credit limit increase.
For an example of the latter, I was able to identify the American Express credit limit increase request form by logging into the portal and clicking on the “Account Services” tab.
While each card issuer will have a different process for this, it’s important to note that many of them may ask you to provide up-to-date income information.
Some may also request that a hard inquiry be conducted on your credit report to unearth any potential red flags. Make sure you clarify whether the card issuer plans to do this prior to requesting the increase.
Authorizing a hard inquiry is likely to ding your credit score. And if you have your credit frozen, it may require that you thaw it with the credit bureaus.
Note: Keeping your credit frozen shouldn’t prevent you from receiving a limit increase if a hard inquiry is not required.
Help vs. Hurt? Why a Credit Limit Increase Request Matters
There are two major reasons that requesting a credit limit increase could benefit you, but there are also a couple of ways it could potentially put you at a disadvantage. Timing is everything. Let’s take a look at each.
How It Can Help
- Increased Spending Power: The simplest benefit is that you have more access to funds for spending. This could be particularly useful if you’re planning a significant purchase and want to take full advantage of a rewards program and the superior protections that a credit card offers over a debit card.
- Credit Utilization Metrics Impact Your Credit Score: Increasing your credit limit can be a quick path to raising your overall credit score. If you get a higher limit and don’t actually use it, this should help lower your overall credit utilization.
How It Can Hurt
- Are You Considering a Mortgage Soon?: If you’re looking to buy a home or refinance your existing mortgage in the near future, you may actually want to wait until after you finish that business to request a limit increase. Not only are you potentially exposing yourself to a hard inquiry, but you may also spook mortgage underwriters if you have too much unused available credit.
- You Could Inadvertently Decrease Your Limit: Your request for a credit limit reassessment also has a chance to hurt you if it is mistimed. Your card issuer may not like what they see when evaluating your increase request and may instead consider a limit reduction. This is especially a risk if you’ve recently lost your job or missed credit card payments.
Tips for Maintaining Your Credit Limit
Once you have a credit limit that is to your liking, you’ll want to work hard to maintain it and set it up for future increases.
Here are three easy tips for maintaining your existing credit limit:
- Pay bills on time. The quickest path to upsetting your credit card issuer is not paying your bills. If you start showing a pattern of late or missed payments, they may quickly lower your limit or may even close your account.
- Pay more than the minimum. Running balances on your credit card is never something Team Clark recommends. But if you have to carry a balance, make sure that you are paying more than the minimum balance due. Not only will that help you eat away at the interest you’re accruing, it will also show the card issuer that you’re not in over your head with the existing limit.
- Make regular purchases with the card. Team Clark recommends that you set up a recurring subscription to be paid with your credit card each month and then paying it in full. That way you are showing regular activity on the card. If you go months without using your credit card, you may be subject to a credit limit reduction or card cancelation.
Pros and Cons
Still unsure if you should request a credit limit increase for your credit card? Let’s walk through the pros and cons.
|Could help you increase your credit score by lowering your overall credit utilization||Could reflect poorly on loan application|
|Could help you increase your spending power for a big purchase||Could result in a limit reduction if card issuer doesn’t like what it finds|
|Approval could signify strength in your relationship with the card issuer||Could tempt you to spend money|
Final Thought: If you’re looking to increase your spending power or improve your credit score, a credit limit increase on your credit card may be a good idea.
If you’re in the market for a new loan or have had some recent financial situations that may reflect poorly upon closer examination from your card issuer, you may want to delay your request for a better time.
Have you recently received or requested a credit limit increase? We’d love to hear about your experience in the Clark.com community.