Credit limit increases are often touted as an easy way to improve your credit score. They can also make it easier to make large purchases – or simply offer peace of mind that you can cover emergency expenses should something go awry.
But what exactly is a credit limit increase, and how do you get one? This blog unpacks how to get a credit limit increase, and how to use yours wisely.
A credit limit increase bumps up the maximum amount you’re allowed to spend on a credit card. Lenders may grant a credit limit increase at the account holder’s request. They may also increase your credit limit automatically if your account remains in good standing for a long period of time.
A credit limit increase can affect your credit score by improving your credit utilization ratio. Credit utilization refers to the amount of debt you carry compared to your total credit limit. Credit utilization accounts for up to 30% of your credit score – which is why a credit limit increase can give your score a boost.
Most experts recommend keeping your credit utilization rate below 30%. With a lower credit limit, it’s easier to extend a greater percentage of your total available credit. Imagine you have a card with a $1,000 credit limit and $400 balance. If your credit limit increases to $2,000, your credit utilization rate will drop from 40% to 20%. As a result, your score will likely improve.
On the other hand, a higher credit limit means you can accumulate more debt. In the example above, you can now spend twice as much before you max out your credit card. This comes with a catch: if you carry a higher balance, you’ll pay more each month in interest. This can stick you on a treadmill of debt that ultimately harms your credit score.
Before requesting a higher credit limit, be honest with yourself about your financial reality. If you’re ready to handle the extra responsibility – read on to learn how to get a credit limit increase.
Figuring out how to get a credit increase is usually a straightforward process. Here are four ways to access a higher credit limit:
The best time to request a credit limit increase depends on the lender, borrower, and the credit card account. A strong credit score, steady income, and track-record of using your current card responsibly all improve your approval odds. Here are five factors to consider:
There’s no set timeframe for how long it takes to get a credit limit increase. You could be approved immediately, or the lender could take up to a month to review your request. In general, expect to hear back within ten business days. If your credit card issuer approves your request, you’ll usually have access to the additional funds immediately. It may, however, take several weeks for your new credit limit to show up on your credit report.
A credit limit increase means your lender has faith in your “creditworthiness.” It’s important to be aware of common pitfalls, however – and how you can use your new borrowing privileges to improve your credit. Here’s what to do (and not to do) if you’re improved for a credit increase:
There are many reasons you may be denied a credit limit increase. Fortunately, you can fix most of them with time and a little effort. If you get denied, call customer service – they may suggest you re-apply and request a smaller increase. Otherwise, it’s best to wait at least six months before trying again. In the meantime, you can focus on improving your credit history and approval odds.
A credit card issuer may deny your request if your account activity, income, or overall credit history doesn’t meet their approval standards. Common reasons a credit limit increase is denied include:
Used wisely, high credit limits are a great way to improve your credit score. But you can still build credit with a lower credit limit. Start by using your current credit accounts responsibly: pay on time, keep your utilization low, and take care of any negative information on your report. Tools like StellarFi can help improve your credit history even faster.
With StellarFi, you can build credit using the bills you pay each month already. Simply link your existing expenses, like your rent, phone payment, and even subscriptions like Spotify or Grubhub. StellarFi pays on your behalf and reports your positive repayment history to the credit bureaus. StellarFi improves 100% of the factors that make up your credit score – including your credit utilization rate.
Signing up is easy, and there’s no credit check. Become a StellarFi member today!
The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.