Learn How to Increase Credit Limits on Your Credit Cards
For many of us, there is no limit to the joys of shopping—except, perhaps, our credit limit.
Nearly every credit card is issued with a credit limit, but you may find you want or need a higher limit after you’ve used your card for a while. How is credit limit determined to begin with, and how will you know when to ask for credit limit increases?
First, there are a few things to know about credit limits before you submit a request to increase your credit limit.
How is credit limit determined
When a lender issues a credit card, they’re taking a risk that the borrower will pay the amount charged each month. Your credit limit is based on this risk, which is determined by factors such as:
- Monthly income and expenses
- Employment history
- Payment history with other debt
- Credit utilization rate
- Credit score
Taken together, this information paints a picture of how much debt you might be able to assume.
Why credit limits matter
Credit limits do more than tell you how much you can purchase on your card. Every time you charge an item on your card, you increase your credit utilization rate—the percentage of your available credit that you’re using. Your credit utilization rate is one factor in your credit score, and your goal should be to keep the rate no higher than 30 percent. So, if your credit limit goes up and your spending stays the same, then your credit utilization rate immediately decreases.
When to ask for a credit limit increase
When your situation changes—for example, when you get married, buy a house or start a family—your spending habits typically change as well, and you might want a higher credit limit. Before you request to increase credit limits on your credit cards, check your credit score through one of the free websites and make sure it’s strong. Also, make sure you have a good payment history with no late payments, and a steady, established source of income. Most importantly, you should only request to increase credit limits when you’re confident that you won’t overspend.
How to request to increase your credit limit
There’s no special process to request a credit limit increase. Customer care representatives whom you call with questions about your account are the same ones who can initiate the process to request an increase. In addition, some card issuers allow you to request the increase online, beginning with a link from your online account.
One final consideration: When you request a credit limit increase, a credit card issuer will often initiate what is called a “hard pull” on your credit report. A “hard pull” occurs when a lender checks your report for the purpose of extending credit, and it can take points off your credit score.
So, if you’re thinking of requesting a credit limit increase, know your limits and enjoy the expanded opportunities of strong and responsible credit.
Looking for more tips on improving your credit and money management? Check out more of Comenity’s financial education resources.