How To Increase Your Credit Limit
We’ve already discussed what a credit limit is and how lenders determine it elsewhere. In this post, we discuss how to increase it.
Learning how to increase credit limits on your cards offers all kinds of advantages. You can borrow more, achieve greater financial flexibility in your life, pursue business ventures, and even boost your credit score.
Getting a Credit Limit Increase
So, what can you actually do to increase your credit limit?
Request a Credit Limit Increase From Your Online Account
Some lenders may allow you to request a higher limit online. Sign into your account and then look for an option to increase your limit.
In some cases, your lender will ask you to fill out an application form, proving that you can support a higher limit. In others, they may grant access to higher limits automatically (for instance, if you’re a long-term customer who always pays on time).
Call Your Card Issuer
You can also phone your card issuer directly. Requesting a credit limit increase this way is easy: Just provide answers to your security questions and then quote your card number. The customer service rep will then review your account and tell you whether you’re eligible for an upgrade.
Apply For Another Card
If your current issuer won’t give you an increase in your credit limit, you still have the option of applying for a new card with another provider. Choose this option if you already have a good credit score as you are much more likely to be accepted. Note that even if the new issuer doesn’t offer a higher limit, simply taking out a second credit card gives you access to more credit overall.
Check for Automatic Credit Limit Increases
Some issuers offer an automatic credit limit increase once you’ve had your card for a certain period of time, so long as you’ve been making repayments on time. These typically kick in after six, 12, or 24 months. In most cases, your issuer will contact you directly, asking for your permission to increase your limit, so you still have control over the process.
Pay More Into Your Security Deposit
Interestingly, you don’t have to contact your issuer directly to secure a higher limit. Another option is to increase your security deposit. Offering creditors more money upfront reduces the risk they face, giving them confidence that they can raise your credit limit safely.
Why Was My Request for a Credit Limit Increase Denied?
Even if your account is in good standing with the creditor, they may still deny you a limit increase. Reasons for credit limit increase denials are as follows:
- Your account is too new, and you’ve had too little time to demonstrate your creditworthiness
- You haven’t waited long enough since your last credit limit increase
- You have a high delinquency rate on your credit card balances with this provider, or another
- Your credit score is too low
- You’re using an account that doesn’t permit credit limit increases
- You haven’t paid enough into your security deposit
If lenders decline your request for a credit limit increase, find out why. In most cases, the lender will tell you immediately that you’ve been declined; however, they may also write to you in the mail.
Lenders provide written reasons in an adverse action letter. If you get one of these, focus on improving your credit score. Then try again to increase your credit limit in a few months’ time.
Credit Limit Increase Fees
Some lenders charge fees to increase your credit limit – and they can be expensive. In some cases, fees can be as much as 25% of the requested limit increase.
To reduce fees, focus on improving your credit score. Lenders only charge fees to cover the risk you pose. When the risk is lower, the need for them to compensate themselves after increasing your credit limit also goes down.
If the issuer asks you to increase your security deposit, remember you’ll be able to withdraw these funds when you close your account. Hence, it’s like a deposit you might pay to a landlord to cover their losses during a tenancy. As long as you make payments, you’ll eventually get the money back.
The Bottom Line
Ultimately, most people can increase their credit limit relatively easily, whether they go directly to the card issuer or take out a new one with another provider. Learning how to increase your credit limit lets you live your life more flexibly, make bigger one-off purchases, and earn more rewards.
However, it may also encourage overspending and lead to financial difficulty if you don’t apply financial discipline. Before choosing to increase your credit limit, ask yourself whether you trust yourself to use it responsibly.
Is it good to increase the credit card limit?
An advantage of a higher credit limit is that it lowers your credit utilization rate – the amount of credit you’ve used compared to what’s available to you – increasing your FICO score. It also makes it easy to get additional loans, helps in emergencies, allows you to earn more rewards, and lets you make bigger one-off purchases.
Will credit card companies automatically increase your limit?
Not all credit card issuers offer automatic credit limit increase services. Most will first contact you, telling you that you qualify, giving you an opportunity to opt in. Others will wait for you to contact them before raising your limit.
What happens if I go over my credit limit but pay it off?
Even if you pay off your credit card in full, rating agencies will note that you went over the limit on your credit report, potentially harming your FICO score. Generally, if you care about your credit score, keep your spending below your credit limit.
How can I raise my credit limit without asking?
Some issuers offer limit upgrades automatically. Check the terms and conditions of any credit card you take out to see whether you qualify.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.