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More than likely, you’re aware of what a credit limit is. Just in case you’re not, it’s the maximum amount of money you can spend on your credit card.
Also referred to as a credit line, most credit cards have a credit limit. Credit limits can range from a few hundred dollars to tens of thousands of dollars. The credit limit assigned to a credit card will depend on the specific card and user.
While you may not think a credit limit is important, we’d suggest you reconsider. It’s quite the opposite, credit limits are super important. For beginners, your credit limit affects how much you’ll spend on your card.
Perhaps most important, credit limits can affect your credit scores and you already know how important those are.
Before we answer how often can you request a credit line increase, it’s important to understand how credit lines can affect your credit.
When lenders go to determine if you’re worthy of credit, they will review your credit reports from the 3 major credit bureaus.
Those would be Experian, Transunion and Equifax. Your credit limits can play a big role in your credit scores.
One of the most important things lenders look at is your payments. If you’re making your payments on time, the next thing they focus on is credit utilization ratio.
Your credit utilization ratio is the percentage of available credit you have combined.
Let’s use a few examples.
Chad has a credit card with a $4,000 credit limit. He has a balance of $1,000 on his credit card. His credit utilization ratio is 25 percent.
Jennifer has 3 credit cards with a total limit of $10,000. Her 3 cards have a total balance of $5,000. Therefore, her credit utilization ratio would be 50 percent.
Now, how can you lower your credit card utilization ratio? In most scenarios, higher credit scores can be obtained with lower ratios. One way to immediately lower your credit card utilization is by making a payment.
Another quick way to lower that ratio is by asking for a credit line increase.
If Chad can get a $6,000 credit line increase (using our example from above), he could drop his utilization ratio to 10 percent. If he was approved, he would have a $10,000 credit limit and a $1,000 balance, equalling a 10 percent credit card utilization percentage.
That would be a drop of 15 percent, which could potentially boost his credit score.
How To Increase Your Credit Limit
There’s 2 ways you can increase your credit limit, one strategy is slow and one is fast.
Waiting On An Automatic Credit Line Increase
The slowest strategy for getting a credit line increase is waiting for automatic credit line increases. Many major credit card companies do this without you having to do anything at all.
If you’re using your credit card responsibly and you use the card enough to warrant a credit line increase, you could get a higher credit line every 6-12 months.
You can improve your odds by;
- Use your card often, it generates fees for the credit card companies. If you don’t use your credit card frequently, they may not approve you for a credit line increase.
- Make sure your payment history is great, 100 percent. Always make your payments on time.
Request A Credit Line Increase
If you’ve been using your credit line responsibly and have been for some time, you can contact them to request a credit line increase.
If you have an online account, some credit card companies have a link you can follow. Other companies may require you to call customer service.
Now, before you get started, you’ll likely get a hard inquiry on your credit report for making a credit line increase. You should check to make sure before going through with it.
Your income plays a big role in the decision, so you may be asked to submit your annual income. Again, not all of them require it but some will.
Increasing Your Credit Limit Online
There’s a few steps you’ll have to follow if you choose to increase your credit line online.
- Log in to your account or create an online account
- Located the credit line increase link
- Fill in the requested information and submit
It’s possible that you will get an instant decision, but it could take a few days.
Increasing Your Credit Limit On The Phone
If you’ll be calling customer service for your credit line increase request, here’s what you’ll likely need.
- Social security number
- Physical address
- Phone number
- Monthly or annual revenue
- Credit line increase amount
Likely super important, you want to explain to them why you need a credit line increase. If you have a valid reason and you let them know, it can improve your odds.
Remember, be nice and don’t be rude. It’s not the callers decision, it’s the bank’s decision. If you don’t get approved, be polite and try again in 6 months.
I know it can be tough to do, but it’s best for everyone involved.
How Much Should I Increase My Credit By?
The more credit limit requests you make, the more hard inquiries you’re going to have on your credit report. If you have a lot of cards, these inquiries could bring your credit scores down, so be aware of that.
They could also prevent you from opening new cards, as some issuers deny applicants who’ve had more than a certain number of inquiries in the past two years.
That being said, if you successfully negotiate higher limits on your credit cards, your credit utilization ratio will go down and your score should go up. The hard inquiries will fall off your credit reports in two years.
If you have a few well-used cards with low limits, this may be the best route to take.
Every scenario is different, so use your best judgement. $1K may be good for someone, $5K may be good for another. If you’ve been responsible, a higher limit would be warranted.
If your history with the credit card is great, credit scores are good, you have a good chance to get your credit line increased.