When to Ask for a Credit Limit Increase and Why You’d Want To
It may seem silly but getting a new credit card can be a fairly exciting event. Not only will you soon have a shiny new piece of plastic in your wallet but will hopefully have access to some worthy perks that come with card ownership. On the other hand there is always one question that might serve to hinder your good mood: how much can you spend on your new card?
Depending on a number of circumstances you could be approved for a great card but only be offered an okay credit limit to start with. If that’s the case you may want to request an increase. So how do you go about doing that and how long should you wait? Here’s what you need to know about increasing the limit on your credit card.
Why credit limit increases are a good thing
Taken at face value it would seem like those with good financial habits would have little to no use for a limit increase on their credit card. After all strong borrowers are likely to pay off their credit card balance each month without even coming close to maxing out their full spending potential. However having a greater credit limit could actually serve to increase your credit scores even more.
The reason for this quirk has to do with your credit utilization rate and how that factors into your credit score. Say for instance your credit card limit is $6,000 but your average monthly balance is around $1,000 — your utilization would be around 17%, which is good but not necessarily “excellent.” If possible it would be better to ask your card issuer to bump your limit up to $10,000 so that you can keep your utilization closer to a more desirable 10%. So as you can see you’d only be using a small fraction of your total limit but, by doing so, you’d show that you’re a trustworthy and responsible borrower.
How and when to request an increase
When it comes to requesting a limit increase the steps to follow will vary depending on who issued your card. For some banks and card providers it may require calling into their customer service line and speaking with a representative. Meanwhile other issuers like Discover give customers a way to request an increase by logging into their account on the company’s website. Additionally you may find yourself the recipient of a limit increase without even asking! Some card companies will simply up your limit once you’ve proven yourself to be a dependable borrower and may even continue to raise it every so often.
That being said you shouldn’t be disheartened if you don’t get an automatic bump but you should be strategic about when you request one. For example asking for an increase a month or two after opening a new card could be a red flag to certain companies and they might deny you. Many experts suggest waiting until you have six months of on-time payments under your belt before asking for an increase. Another good time to make your request is after your credit scores have risen. This is especially true if they’ve made a significant jump since your initial application or last limit increase.
If you still find yourself stuck with a smaller limit than you would like, consider making multiple payments per month. By doing so you’ll help keep your balance and utilization rate low, which will help to raise your credit scores. Then, with your improved scores, your card issuer will be more inclined to up your limit. It seems like kind of a catch 22 but, hey, those are the rules.
Don’t be discouraged by the credit limit you’re given on your new card — it can always be increased! However you should be mindful about how you go about making your case for a higher limit. By making on-time monthly payments, working to keep to your balance low in spite of the restrictions, and raising your credit scores overall you’ll run a better chance of getting your limit to where you want it.