If you find that your current line of credit has grown a bit small for your spending, requesting an increase from your credit card issuer might be in order. It’s a process that sounds simple enough, and sometimes it is, but requesting an increase can have multiple consequences on your financial standing – both positive and negative. In addition to having a legitimate reason for getting an extension, you must also have the timing right, and you should be aware of how your overall credit is impacted. Read through this guide to determine whether a higher credit limit is appropriate for you. Here’s how to increase your credit limit.
Before Your Request an Increase
Meeting the Eligibility for a Credit Line Increase
It’s possible to receive a credit increase if you simply call your issuer out of the blue, but it pays (no pun intended) to be prepared before you pick up the phone. Review the following factors ahead of making your request:
- Your account’s standing: It should go without saying that the credit account you want an increase for should be as spotless as possible, with on-time payments and balances kept low, if not at zero. You’re trying to show that you’re responsible enough borrowing money that having access to a higher amount won’t pose a risk for the issuer.
- Your income: Your income should complement the level of spending available to you. Requesting a credit increase if you’ve recently lost your job or downgraded your current post tells the issuer that you want more spending power with no realistic means of paying back what you owe.
- Your credit history: Expect to have a harder time being approved for an extension if your credit report is stained with negative information. Open accounts with high balances or those that have gone into collections give a bleak impression of you to issuers, and they won’t want to risk their money with someone who likely won’t pay it back. On a related note, your credit score should also be favorable. While not as in-depth an indicator of your financial standing, this three-digit number is still a critical piece of information that creditors and lenders everywhere will take into consideration.
- Your credit utilization: How much of your current credit are you already using? If you often knock at your limit’s door, but you pay off your balance on time and in full, then it’s certainly reasonable to ask for an increase. If you’re still chipping away at a purchase you made several months ago, though, it might be best to reevaluate your spending before making the call.
Do You Want or Need to Increase Your Credit Limit
This should be the first question you ask yourself before even planning to contact your card issuer. Is the extra spending power necessary or simply a commodity you’d like to have just in case you happen to buy more things? Asking for a credit increase because you want to spend more money – and not thinking about the long-term effects of more spending – isn’t just short-sighted, it’s also irresponsible. If you now have more necessary expenses – be it for your business, your children, your home, or your day-to-day life – you should ask for an increase because all factors indicate that you need one. If you’re using your credit card for more casual pursuits such as purchasing clothes, traveling, or dining at gourmet restaurants, there’s no harm in phoning your issuer as long as your funds can pay off any balances your rack up. You must first be able to justify – to yourself, at the very least – an increase before you say the words to your issuer.
When (and When Not) to Request an Increase
If all signs point to you getting approved for an increase, you should also feel confident that it’s the right time to make the request. Is your credit card account in top shape? Good. Is your credit history healthy? Great. Did you recently get a raise or move to a higher-paying job? Even better. The opposite is also true regarding when you should wait or ditch the idea of an increase altogether. In addition, you should make sure that your account isn’t too new. Asking for a higher limit when you haven’t even had your card for six months will probably result in a denial. If you’ve recently requested increases for other lines of credit, you will want to let some time go by, as well.
The Effect on Your Credit After You Request an Increase
So you’ve contacted your card issuer and requested a credit line increase. Now what? If the issuer approved it, congratulations! However, you shouldn’t just forget everything you’ve read and find the nearest place to use your plastic. Both short-term and long-term repercussions come with requesting and receiving a credit extension. Be aware that when you contact your card issuer and request a credit limit increase, it’s likely that the issuer will do a hard pull of your credit report to evaluate where you stand. A hard pull will ding a few points off your credit score, and the inquiry will remain on your report for two years. If you make several calls for more credit, it may mean multiple hard inquiries in a short period – an unfavorable look on your report. An increase can also help your reputation, though. Having more credit yet keeping your spending relatively the same will raise your credit utilization ratio. This means you have more money available to spend, but your actual expenses are kept low. Having a low ratio reflects well on you and keeping it up will eventually move your credit score up. Your ratio will obviously be higher if you spend more as a result of your credit increase, but this won’t necessarily be bad as long as you continue to make on-time payments and keep your balance as close to zero as possible.
Almost everything regarding credit is a balancing act, and careful consideration before making any decision that involves credit will always be a wise move. It’s important to not make any hasty calls when they involve your finances, and you should always be aware of the impact your actions will have. As the saying goes, with great power comes great responsibility.