When you apply for a credit card, you’re given a certain spending limit based on your income and creditworthiness. After six months to a year of timely payments and low revolving debt, you may be able to request an increase of your credit limit. But is this always a good idea? Here’s why you may or may not want to ask for a higher limit.
Why would you want a credit limit increase?
There are three major reasons why you may want to increase your credit limit:
You want to obtain more credit for making purchases. If your limit is too low to cover a large planned expense, you may want to increase it to take advantage of credit card rewards earned on that purchase. Ideally, you’ll have the money in the bank to pay this off before accruing interest. Or perhaps you lost your job and need a buffer to pay your bills. We’d recommend using 0% introductory APR credit cards instead of increasing your existing card’s limit. Here’s a list of our favorite 0% offers.
You want to obtain more credit in case of emergency. While you can’t use your credit card for every rainy day, it can come in handy for many emergencies. A credit card can pay for car repairs, necessary items that need to be replaced or last-minute plane tickets home. The higher your credit limit, the more you have available for any emergencies that may arise.
You want to lower your credit utilization. Your credit score is made up of five factors: payment history (35%), amounts owed (30%), length of credit history (15%), types of credit in use (10%) and new credit (10%). The second factor, amounts owed, is made up mostly of something called “credit utilization.” Credit utilization is your balance in comparison to your limit. So if you have a credit limit of $10,000, and a balance of $3,500, your credit utilization is 35%. There are two ways to lower this ratio — paying down your balance or increasing your limit. If you were to increase your credit limit to $12,500, and still had a balance of $3,500, your utilization would drop to 28%.
For more information on how to request a credit limit increase, check out this NerdWallet article.
There are also a few reasons why you might not want to get a limit increase:
You don’t trust yourself to keep your spending in check. In this case, it may be best to leave your limit as is. If it’s already a bit higher than you feel comfortable with, you can call your issuer and request a limit decrease. However, keep in mind that if you have debt this will raise your credit utilization.
You don’t want to max out your credit limit with a particular issuer. Some issuers may put limits on how much credit you can get for all of their cards combined. If you hit a certain limit, you may be unable to get other cards with that issuer. So if you’re close to hitting the limit and want a new card, you might want to stick with your current limit or decrease it.
You don’t want a hard inquiry on your credit report. If you request a credit limit increase instead of it being offered to you, it may mean a hard inquiry on your credit report. A hard inquiry is an authorized credit pull from a lender or service provider. This will affect your credit score for a period of one year, and will remain on your credit report for two years. If you’re concerned about the state of your credit score and can’t afford to lose a few points, it may be wise to pass on asking for an increase.
Credit limit increases can improve your credit score and give you access to more funds in case of emergency. However, they can also provide you with more money than you can pay back without accruing interest or add a hard inquiry to your credit report. The decision to request or accept an increase will depend on your credit situation and spending habits.
There are also a few reasons why you might not want to get a limit increase: You don't trust yourself to keep your spending in check. In this case, it may be best to leave your limit as is. If it's already a bit higher than you feel comfortable with, you can call your issuer and request a limit decrease.
The number one downside of increasing your credit card limit is that you could start to spend more – due to the available credit – and therefore your credit card balance could increase. You owe more! That could mean you get into more debt, if you don't manage it, which could have a negative impact on your credit score.
If you request a credit limit increase, your credit card issuer may perform a hard inquiry on your credit, which may temporarily lower your credit scores. If an issuer automatically raises a cardholder's credit limit, it may involve a soft inquiry, which doesn't affect credit scores.
While some credit card issuers may run a hard inquiry on your credit reports when you request an increase to your credit line, Discover doesn't do that. As a result, you can submit your request without worrying about risking an impact on your credit scores.
Keep in mind that a request could result in a hard credit inquiry, which might slightly impact your overall credit score. The most effective time for requesting an increased credit limit is after you have been a cardmember for a period of time.
An increase in the credit limit can be taken by the banks as a proof that they can trust you when they lend you money. A higher limit on your credit card will also lead to a high credit score and a good credit score will allow you people easily get loans at low interest rates.
If you like your current card, asking for an increase could be the right move.But if you're looking for additional rewards or a better rate, opening a new line of credit may be the right option. No matter what you choose, always remember to use credit responsibly and spend within your means.
Does Asking for a Credit Limit Increase Affect Your Credit Score? That can depend on your credit card issuer. If it does what's known as a soft credit check, it will not affect your credit score in any way. If the company makes a hard credit check, that may lower your score a bit, but usually only temporarily.
While you may jump at the chance to ask for a credit limit increase if you're strapped for cash, it may be wiser to hold off. Credit limit increases aren't risk-free. You could see a ding in your score if your card issuer pulls your credit report to verify if they should approve a credit limit increase or not.
In the long term, a credit limit increase may improve your credit scores, provided you make regular, on-time payments. In the short term, however, asking for a credit limit increase may temporarily decrease your scores.
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
Discover credit card limits will always be at least $500, and there's no disclosed maximum. How much you get is determined by your creditworthiness. The only exception is if you have Discover it® Secured Credit Card.
If you're just starting out, a good credit limit for your first card might be around $1,000. If you have built up a solid credit history, a steady income and a good credit score, your credit limit may increase to $5,000 or $10,000 or more — plenty of credit to ensure you can purchase big ticket items.
There are a few reasons this might be the case. If you've requested an increase recently, American Express might deny a second request. Try again after more time has passed. Other reasons for denial could be a consistently high card balance, frequent late payments or a low credit score.
American Express may offer to increase your credit limit without your needing to ask. If you use the card regularly and always pay your bill in full and on time, the company may you offer a credit limit increase.
How much of a credit limit increase should I ask for? Most experts recommend asking for a 10% to 25% credit limit increase. But the amount you're approved for can vary by issuer. If you ask for a higher amount, the issuer may run a hard credit check.
No, because prescreened offers and pre-approval involve a soft inquiry. Also known as a soft pull or soft credit check, a soft inquiry doesn't affect your credit scores. The soft inquiry is simply a way for lenders to determine whether you may qualify for their credit card offer.
For example, having higher credit card limits will reduce your overall home loan borrowing capacity, while having a whole lot of debt on your credit cards may reduce your chance of being approved for a home loan at all…
Before you get started on your request, consider the three qualifications: You generally need to be a cardholder for at least three months. You typically can only request an increase once every six months. Card issuers may review your credit report if you request a specific credit limit.
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