Increasing the credit limit on your credit card may be the only thing on your mind now that you need money, but it is important to confirm if it is the best idea for you. The truth is that, while it may be a good idea for some people, it may be the worst idea for others. It is important for you to sit down and consider whether it is a good idea for you before picking up your phone to contact your issuer.
First, it is important that you ask yourself some questions before starting an increase request. Ask yourself why you want to increase your credit limit. Is it just to go on a shopping extravaganza or buy luxurious things you cannot afford without credit? If your answer to these questions is yes, then you should know that increasing your credit limit is not a good idea. In fact, before you forge ahead to get your credit limit increased, you need to prove to your bank and yourself that you have all it takes to handle credit responsibilities. That means making sure you prove yourself as an honest and reliable customer for at least 6 months prior to your request. Your chance of getting an increase on your credit card limit shrinks if you have a history of late or missed payments. This post will show you all the things you need to know about increasing your credit limit. Through the information here, you will be able to decide whether increasing your credit limit is a good or bad idea for you.
What You Must Know About Credit Limit
Your credit limit is the largest amount of money your credit card issuer will make available for you when you want to borrow money. Most credit card companies normally increase the customer’s credit limit periodically. This is mostly for customers with a good credit history or rating. Getting good credit is all about watching your total debt balance and making your payments on or before the due date. While some credit card companies normally increase the limits on their customer’s credit card over time, they only do so for some selected customers. What if you are not among the chosen but you want to increase yours? This is the question many people ask. If you are asking this, the first thing you should consider is if the increase is good for you and your finances. If you do not understand the reason that increasing your credit limit is necessary, you can read more of this post for details.
What then is a good credit score for getting approved? Good credit scores are in categories with 750 and above categorized among the excellent credit score, 680 -749 as good credit score and 600-679 as average credit score. Your chance of getting approved for credit increase will be more when you have 750+ credit score or 680 to 749, but when you have either from 600-679 which is considered average you may find it difficult to be approved. If you get credit score that is below average, you should not even try as your issuer will unlikely approve your credit increase as you are considered to be at higher risk of accumulating debt. If you have 750+ credit score, the recommended credit card issuer you should go for include: Capital one, American Express, Bank of America, Barclaycard, U.S. Bank, Discover and Citi. For credit card users with 680-749 credit score, the recommended back are: Chase, Bank of America, Capital One, Barclaycard, Discover as well as U.S. Bank. But, if you have average credit score the issuer recommended for you are Credit One credit card, The Capital One Secured MasterCard and others.
Bank Requirements for Credit Limit Increase
What are the requirements for bank credit card increase? If you are asking about this the best answer to it is that it depends on the bank. There are general factors considered by all the banks and there are specific factors each of the banks considers. Like the American Express which mostly considers overall level of customer’s debt relative to the customer’s financial resources the bank is aware of. The bank also considers several other factors involving entire credit profile of a customer such as: Credit bureau reports, credit score with respect to the time of application for increase, Payment history, reported income and financial usage habits and lots more.
Tips on How to Increase Your Credit Limit
To experience financial wellbeing, you need to keep a good credit score. Having a good credit score will make it easier to get car loans, mortgages, and other kind of loans you may need for major project that need large amounts of funding. Since increasing your credit limit can boost your credit score, experts here want to provide you with some tips on how to increase your credit limit.
- Make Sure You Do Not Ask for Increase Before 6 Months: It is normal for most credit card companies to review their customer’s credit limit after about 6 months. That means your company can easily increase your credit limit over time. However, if this does not take place, you can easily request for increase from your issuer, although your chances of getting the credit increase will be slim if you ask before the end of the first six-month period. Most issuers see that as a red flag. To increase your chance of getting your desired increase, avoid asking for high percentage increase. Instead, ask for about 25 or 30% increase.
- Just Wait for Your Issuer to Increase Your Credit Limit Automatically: For this, you will not need to do anything to have your limit increased; the company will do that automatically. However, you still must keep a good credit score. Making sure that your credit card account has low limit will increase your chance of getting an automatic increase in your credit limit.
- Ensure Frequent Use of Your Card: The best ways to show your credit card issuer that you deserve an increase in your credit limit is to ensure regular use of your card and quickly pay back the credit. You can also put a large sum of money on your card and take several months to pay it back to show your issuer that you need more fund and you can use it.
- Restrict your limit increase to only your best credit card: While you may have many credit cards at your disposal, it is important to avoid requesting for increase with more than one at a time. This helps you avoid denial of your request.
What to Do When Denied Limit Increase
It is important for you to know that your issuer can easily deny your request for an increase in your credit limit. But, if they deny you, you need to find out why. To find out what happened, call your issuer directly. If the company says that your credit cost you the increase, check your credit report to find out if there is an error in their claim. Be sure to correct any mistakes before asking again for an increase. One thing you should understand is that your company may not always grant your credit increase. But, if you feel that your company denied your increase unjustly, you should offer the company compelling and convincing reasons why you deserve it. Getting a raise at work and keeping your credit history spotless are great ways to convince your credit card company that you are reliable and worthy of the increase. If after proving these two things the company still refuses your credit limit increase, find another company that treats you better.
When is it a good time to get approved?
You are to ask for credit card limit increase when the following occur:
- You recently got a raise or bonus at work: When your income increased, it simply shows that you can meet up with increase in expenses. So, it will be the right time to ask for credit limit increase and stand better chance of being approved. Nevertheless, you must provide proof of your increased income before your increase can be approved.
- You are sure your credit score is good: Having credit score up to 750+ or between 680 to 749 will indicates to your issuer that you are really responsible in terms of money. That means, you are likely to make your payment on time and also know the amount you can charge monthly.
- You have succeeded in maintaining good track record: If you have never maxed out your card and have always been making payment on time, your limit increase will be more likely. To get 750+ excellent credit score, you must have been making on-time payment to your issuer at least for the past 10 years. That can increase your chance of getting increased credit limit without stress.
What to Avoid When You Want to Increase Your Credit Card Limit
In your quest to get your credit limit increased, there are some things to avoid. This will save you from serious financial problems that can turn good credit scores bad in no time. Some of the things to avoid include:
- Increasing your credit limit to spend on things you cannot buy without credit: Asking for a credit limit increase just to go on a shopping spree is one of the mistakes that can easily put you in financial trouble. Therefore, it is important that you avoid it. Your issuer will not increase your credit limit if they realize you do not spend the money responsibly.
- Avoid seeing added credit on your card as free money: Remember that you must pay back every dime added to your credit card on or before the due date. So, when opting for an increase in your credit limit, avoid thinking that it is free money to ensure you spend the money wisely.
- Avoid requesting for increase in your credit limit if you cannot make on time payment: If you are not ready to pay up your credit on time, you should not even think of requesting for increase in your credit limit. Your credit card company will not only deny your credit increase request, but also reduce your credit limit if you stop making payments on time.
In fact, one thing, you should keep in mind while asking for an increase in your credit limit is improving your credit score. Avoid anything that could result in your failure to do so, just to be safe.
4 Things to Know Before Asking for an Increase in Your Credit Limit
If you just discover that the credit limit on your credit card is not enough for you to spend, you should not rush to ask for increase right away. There are some important tips you need to consider first. Some of these things include:
- The reason for the increase: Many people who ask for an increase in their credit limit do so without taking some time to understand why. Your reason for the increase will tell you whether it is a good idea to ask in the first place. If you only want it so you can spend more than you earn or buy luxurious items, it is not the best idea. However, if you want the increase to buy larger necessities on which you can afford to make payments, it might be a good decision to ask for the increase.
- Know more about your credit score: It is important to know your credit score before contacting your issuer for an increase. It is not difficult and does not cost money. You can easily find out about it through AnnualCreditReport.com for free. Your credit score affects your eligibility in getting a credit limit increase. It is also important to confirm your credit use before asking for an increase.
- Know more about the amount of credit increase you want: It is important that you find the amount or percentage increase you need on your credit limit. Make sure you do not go beyond 25-30 percent of your normal limit to increase your chance of getting your limit increased by the issuer.
- Just know that increase in your credit limit has a way of affecting your credit score: This is what most people asking for increases on their cards do not realize. Some have heard about it but do not understand how it works. The higher your credit limit rises, the lower the percentage of your credit use falls, which will in turn boost your credit score. Debt to credit ratio is very important in bringing up your credit core.
One of the acceptable reasons for increasing your credit limit is to enhance your credit score. So, by following the pointer on the article, you will easily have your credit limit increased without putting your credit score in danger.