March 1, 2019
Having access to a credit line is more than just a way to make purchases. Your use of a credit card can help you improve credit, achieve financial goals and reap the benefits of your hard work. At times, you may find that you need access to more credit than the limit on a particular card allows. These five steps help you determine what you need and how to make an effective request, without hurting your credit score.
1. Check Your Credit
To determine where you want to go with your credit limit increase, you should first see where you are. Ideally, check your credit at least once a year. You can do this for free from each credit reporting agency.
A few months before planning to ask for a credit limit increase, get a copy of your credit report. You may have to pay to see your credit scores. Look for mistakes, particularly ones that hurt your credit such as a late payment or collection account. File a dispute for each error, and keep in mind that it can take a month or two to resolve them.
Once you are sure that your credit report is accurate, look at your credit utilization. This is a ratio of debt to available credit. Credit utilization makes up about 30 percent of your credit score, so it is an important figure to manage for your credit. Experts recommend keeping this number under 35 percent, especially if you are trying to improve your credit. Making a strategic decision to increase your credit limit can raise your credit score by lowering your credit utilization.
2. Evaluate Your Needs
Besides lowering your credit utilization, there are several situations in which a higher credit limit could improve your life. Thinking about what you plan to do with the new limit will help you target it to the greatest advantage. Here are a few reasons people consider a credit limit increase:
- You have a card with a limit so small you cannot use it effectively
- One of your cards offers a great rewards program you want to use
- You want to transfer a balance to a card with a lower interest rate
- You need more flexibility to get cash back while traveling or during an emergency
Look at your credit cards and make a list of their benefits and disadvantages. The list will help you identify the biggest problems you need to solve.
3. Protect Your Credit Score
If you have a good or excellent credit score, you may not need to worry much about the effect requesting an increase could have. People with a limited credit history or a lower credit score should take care to ensure that the request does not hurt their credit more than improve it.
When lenders look at your credit, they can perform what is called a “hard inquiry” or a “soft inquiry.” Hard pulls provide the most information about your credit, and the inquiry shows on your credit report. Soft pulls give less data, but they do not appear on your credit. Applying for any new credit usually triggers a hard inquiry. Occasional inquiries might not significantly affect your credit, unless you plan to apply for a mortgage or car loan within a year.
Credit limit increases may require a hard or soft inquiry. It depends on the credit card company and how much of an increase you want. If you have reason to avoid a hard pull of your credit, contact the creditors to find out which one they do for limit increases. Some will do a soft pull for a minor raise, and a hard inquiry for bigger ones.
4. Select the Right Time
Anyone with a credit card can request a higher credit limit at virtually any time. The right timing can improve your chances of getting the increase you want. Lenders want to know that your financial circumstances have improved since they originally approved the account (or since they last granted an increase). Most of the time, they expect you to have the card for several months or longer before asking for access to more credit.
The likelihood of success depends on your income, credit and debts. This means that you may want to wait to make the request until you:
- Have not had a hard credit inquiry in one year
- Pay off fixed-term debts, such as a car payment
- Get a promotion that increases your income
- See improvement to your credit score from timely payments
Waiting even a month or two for the ideal opportunity could make your request more effective, especially if you want to increase the limit by a larger amount.
5. Request an Increase
Once you know which card you want to increase and how much you need, the request may be fairly simple and quick. Many credit card companies allow you to ask for a higher limit through their online accounting system. Be prepared to share accurate information about your current income and debts, including your rent or mortgage payment.
You may have the opportunity to specify the amount of the increase. Be sure to note if you plan to use it as part of a balance transfer offer. You may need to do both at the same time to take advantage of discounts or special rates as part of the offer. If you cannot make the request online, call the company’s customer service line. Since credit inquiries happen in real time, you can usually expect an answer within a few minutes.
Choices you make about your credit can last for years. As such, careful planning about credit limit increases can improve your chances and decrease the likelihood of negative consequences. When using this information, you will be better prepared to make a wise financial decision.
Ben Woolsey is Financial Services Marketing Executive for CreditSoup, a service that provides access to financial solutions including credit cards, prepaid cards, debit cards, auto loans, personal loans, home loans and more. Woolsey has over 30 years of experience in banking, credit cards and fintech. He also currently serves as Director of Marketing for Bulldog Media Group, which owns and operates CreditSoup.