How To Earn A Credit Limit Increase
Did you know a credit limit increase on your favorite credit card can give you greater financial flexibility and may even help your credit score? Find out what you need to do to put your finances in the best position to earn an increase.
What Is a Credit Limit Increase?
When you originally applied for your credit card, the bank determined your credit line based on your financial history and creditworthiness at that time. As you make payments on time, maintain a healthy credit utilization debt-to-limit ratio, and perhaps, increase your income level, you may become eligible for a credit limit increase.
Issuers will generally offer you a credit line increase periodically without you having to ask for it. In these circumstances, they will likely only use a soft inquiry, which won’t impact your credit. Just check with your card issuer so you understand how your score will be affected.
Getting a credit limit increase can help boost your credit score by lowering your credit utilization ratio. You’ll have more credit so you can borrow more while staying within a healthy ratio. It also adds to your flexibility when it comes to day-to-day spending.
Have Your Credit Needs Changed?
An increase to your credit limit is something that many cardholders take advantage of as their credit needs change. For example, something as simple as booking a trip may mean you need access to a few hundred dollars or more in credit just to hold your reservations. Likewise, some hotels and rental car companies will ask to hold a deposit on your credit card to cover incidental expenses. Getting an increase can allow you to continue using your card for day-to-day spending without going over your limit even with credit held as a security.
Another benefit of a credit limit increase is to further take advantage of your credit card rewards. When you use your card for regular expenses and then make on-time payments each month, you can help your credit score while also reaping the benefits of cash back rewards or other perks as you earn points for spending.
What Credit Issuers Look For When Granting A Credit Limit Increase
You can take proactive steps to earn an increase to your credit card limit. Make sure you are following these best practices before requesting an increase:
- Pay your bills on time, all the time.
- Keep your average credit utilization ratio under control.
- Actively monitor your account to stay on top of your balance and identify unusual activity.
- Monitor your credit report. Negative events across your credit portfolio, such as a judgment or bankruptcy, might impact all of your existing credit accounts.
Credit increases can be a huge advantage in terms of flexibility and creditworthiness. To enjoy the benefits, without affecting your future borrowing ability, take steps to make sure your credit is in good shape. And, if interested, familiarize yourself with all the inner workings of how a credit card works.