When you got your first credit card, your credit limit probably wasn’t very high. That was probably fine when you hardly had any expenses, but it may not be sufficient now. If you’re still using your first credit card, you may be looking for a way to raise the limit. Before you try to get your credit limit increased, you may want to make sure you’re interested in getting an increase for the right reasons.
What are the Right and Wrong Reasons for Requesting a Credit Limit Increase?
If you’re considering requesting a credit limit increase, you may want to make sure that you’re doing it for the right reasons. If you aren’t you could end up hurting your credit score, or getting into difficult financial straits.
Right Reasons to Request an Increase:
- Decrease Your Credit Utilization: Experts recommend that you keep your credit utilization below 30% of your available credit. Doing so may help keep your credit score as high as possible. This means it may be worthwhile to request a limit increase. A credit limit increase will lower the total percentage of your credit that you are utilizing. If this lowers your total usage below 30%, it can provide a boost to your credit score. If you are using a large percentage of your credit and pay it off completely every month, it can still negatively impact your credit score. So even if you never carry a balance from month to month, decreasing your credit utilization can be beneficial.
- Increase the Accumulation of Reward Points: If you’re trying to accumulate reward points on a credit card, a responsible limit increase can help you accrue them faster. That said, you should be as careful about increasing your limit in instances like this as you would at any other time.
- Emergency Cushion: Financial emergencies happen sometimes. If you’re worried about how you’d pay for one, a higher credit limit may offer you some peace of mind.
Wrong Reason to Request an Increase:
- Desperate for Money: If you’re already using most of your available credit and scrambling for more, you likely won’t have your request for a limit increase granted. And unless you have a plan for how you’re going to dig yourself out of debt, having an increased credit limit will likely just make your situation worse. A better move may be to create a budget and figure out how to pay down your existing debt.
How do I ask for an Increase in my Credit Limit?
If you’ve decided that you have a good reason for asking for a credit limit increase, you may need to approach your lender and lay out the reasons why you deserve one. When you ask for your credit limit increase, be prepared to justify it by outlining your financial health. Don’t say that you need money for a vacation or want to get more reward points. Before you ask for a credit limit increase, it might be worthwhile to shop around and see what sort of terms you can get at other lenders. You can leverage these in your conversation. Also, be sure to ask if a credit limit increase will impact your interest rate.
How Does Increasing my Credit Limit Affect my Credit Score?
Increasing your credit limit can have both short and long term impacts on your credit score. If you request an increase, your lender may perform a hard pull on your credit history. Any time someone pulls your credit history, it can lower your credit score. Don’t worry though, a credit pull typically reduces your credit score by fewer than five points, and may not affect it at all depending on the type of credit you’re applying for.
When should you ask for a Credit Limit Increase?
You might consider asking for a credit increase before you need it, but not just because you want it. Hard pulls on your credit can impact your credit score. This means that frequently asking for credit increases can lower your credit score. However, you might not want to wait for an emergency to try and increase your credit limit. In the case of a financial emergency, something may have happened that already impacted your credit score, which could mean you’re unable to get an increase to your limit. A credit limit increase request should be a rational part of a well-developed financial plan.
Which Credit Card should I ask for an Increase on?
If you have multiple credit cards, you may be wondering if it matters which you increase your limit on. It depends. Just as experts recommend keeping your total credit utilization below 30%, they recommend that you keep your utilization of any particular source of credit below 30% if possible. So, if you have one credit card with a large balance, it may make the most sense to increase the limit of that card, to reduce the percentage of that specific source of credit that you are utilizing. If you’re trying to get access to more perks that one card offers, like reward points, it may make the most sense to increase the limit on that card.
Getting your lender to raise the limit on your credit card may seem like a daunting task. However, they understand that people’s credit needs change as they move through life. And if you can show lenders that you are a responsible customer, they will likely not have a problem increasing your limit. There are a number of reasons someone might want to increase the limit on their credit card, and they may want to consider only doing it for the right reasons.