Your credit limit is the maximum amount of money you can charge to a credit card. That number might be $1,000 or $5,000 or more, depending on your credit history and your card provider. With a higher credit line, you could spend more money and bring up your credit score. If you wish you had more credit at your disposal, we’ve got the inside scoop on how to make that happen.
1. Use Your Card Responsibly
Credit limit increases aren’t handed out willy-nilly. Card issuers may automatically raise credit lines for folks who have proven that they can use their cards in a sensible manner. That means that in order to have the chance to borrow more money, you’ll need to show that you can make full, on-time payments.
Credit card companies usually review the files of new cardholders after roughly six months. If you’ve carried a balance the majority of the time or you’ve made multiple late payments, you’ll likely be passed over for a credit line increase. Only individuals with good credit will receive this kind of reward.
2. Reduce Your Debt-to-Credit Ratio
Your FICO® credit score – which is the type of score used most often – depends on five factors. One of those components is the amount of debt you owe. It makes up 30% of your overall score and it’s partially based upon your credit utilization ratio (the amount of credit you’ve used relative to your credit limit).
If you’re a big spender with a high debt-to-credit ratio, that can bring down your credit score. In the eyes of the credit bureaus, you’re a riskier borrower who could potentially default or fail to make future payments. When you’re trying to increase your credit limit, a high credit utilization ratio isn’t a good look.
A good rule of thumb is to keep your debt-to-credit ratio below 30%, although having one below 10% or 20% is even better. Taking steps to lower your ratio, like paying down credit card debt, can improve your credit and your chances of getting your credit limit raised.
3. Request a Higher Limit
If six months pass and your credit card company hasn’t raised your credit limit, you can formally request to have it increased online or over the phone. Asking for a higher limit within the first three or four months of having a new card probably won’t get you more than a rejection letter.
In order to have your wish for more credit granted, you’ll have to present a pretty convincing case. Stating that you’re a long-term customer with a high credit score, little debt, more household income than you had months ago or a stellar credit history can help. If you don’t have a legitimate reason for wanting a higher limit or there’s proof that you’ve barely been able to stay afloat, your request could very well be denied.
When you request an increase in your line of credit, it’s also important that you don’t ask for too much extra credit. For example, asking for an increase greater than 25% of the credit you have now might not fly. If you get rejected, your best bet is probably to wait several months before following up with a second request.
Getting approved for a higher credit limit can reduce your debt-to-credit ratio and boost your credit score. But having your request declined – and having to make more than one request – can lower your credit score to a degree. A request for a credit limit increase can count as a hard credit inquiry.
4. Transfer Limits Between Cards
A riskier and less common way to drive up your credit card limit is to apply for a new card or move part of your credit line from one card to another. Both cards will have to come from the same provider, however. So if you’ve got a rewards card with a $1,000 limit and a platinum card with a $3,000 limit, you could increase your rewards card credit line to $2,000 and leave the other card with a $2,000 limit.
The problem with this approach is that it’s easy to lower your score in the process. Opening a new account, for instance, triggers a hard inquiry. Plus, the more cards you have open the easier it is to forget to pay a bill.
Before you look into getting a higher credit line, you’ll want to consider whether it’s something you really need. You’ll have more borrowing power but if you overspend, will you be able to afford the higher monthly payments?
Raising your credit limit to get more rewards could make sense. But you could ultimately hurt your credit score if you’re unable to repay your additional debt.
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