The Best Time to Ask for a Credit Limit Increase

Nov 07, 2016 | Be First to Comment!

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Prior to the financial crisis, credit card issuers allowed customers to request a credit limit increase through their online accounts. Many credit limit increases were given automatically. While issuers have become more cautious than they once were, the process isn't quite as difficult as one might think. Borrowers may be wondering when is the best time to ask for a credit limit increase, and I address one reader's question regarding this topic.

Question: Hello, I recently moved from Canada to the U.S. for a job. I applied and qualified for a Capital One card with a $500 limit. I have been using it regularly and immediately paying off the full amount instead of the minimum payments. I’m thinking of requesting an increase in my limit but I know that I might not get it. When is the best time to do it? Or should I just apply for another credit card? - Rita M.
Answer: Rita, given your great track record with the card, you should not have a major problem with a simple call to Capital One to request a credit line increase. You may have to provide financial information, including your annual income and your monthly mortgage or rent payment amount.

Your credit card issuer may also perform a hard pull on your credit report, which will lead to a temporary drop in your credit score.

Unspoken Rules of Limit Increases

Generally, credit card users are advised against requesting a credit limit increase during the first six months after obtaining a new credit card. Additionally, since issuers are more likely to check your credit reports, it’ll also improve your chances of getting a credit limit increase if you haven’t applied for any new lines of credit in the past six months.

Because you’ve had your card for 18 months with a solid repayment history, you might even get a credit limit increase with little to no hassle. If you want to be more diligent, you can pull one of your free credit reports from AnnualCreditReport.com to ensure that your credit profile is pristine.

Credit Score Ranges and Quality

Credit Score Ranges Credit Quality Effect on Ability to Obtain Loans
300-559 Very Bad Extremely difficult to obtain traditional loans and line of credit. Advised to use secured credit cards and loans to help rebuild credit.
560-649 Bad May be able to qualify for some loans and lines of credit, but the interest rates are likely to be high.
650-699 Average/Fair Eligible for many traditional loans, but the interest rates and terms may not be the best.
700-749 Good Valuable benefits come in the form of loans and lines of credit with comprehensive perks and low interest rates.
750-850 Excellent Qualify easily for most loans and lines of credit with low interest rates and favorable terms.

Asking For the Increase

However, when asked for your desired credit limit, do not ask for an astronomical amount. For instance, you’re likely to be rejected if you say that you’d like a $15,000 credit limit, which is an extremely large increase from $500.

I cannot tell you the correct amount to ask for because there are so many factors that matter and every issuer reviews each case independently. These factors include your overall credit profile (including your credit lines with other lenders), your income, housing expenses (mortgage or rent), and spending patterns.

On the other hand, if you have bad credit and already have a secured credit card, it's actually much easier to increase your credit limit -- just put down more money for your security deposit (which is an easy way to boost your credit score in the eyes of credit bureaus).

Beware the Unexpected Decrease

Every once in awhile, you may find that your credit limit has suddenly been decreased. This not only impacts your credit score in terms of your credit utilization rate, it can also send you unexpectedly over your credit limit.

In the past (and especially in the years following the economic crisis of 2008), some financial institutions would do this to pull back on their risk. Unfortunately, the unsuspecting consumer would suddenly see their balances sail beyond their credit limits and their credit utilization rates soar. While less common now, it could still happen and is further proof of the importance of reading any and all notices you receive in the mail from your bank. (If you've signed up for electronic communication only, be sure to check the messages on your account at least once a month.)

Never Be Afraid to Ask for What You Want

Here's the thing about working with your financial institution, it's just as much in their best interest to keep you happy as it is for you to keep them happy. Even though it may seem at times like your financial institutions are high up in a tower with no interest in helping you, that's just not the case. At the end of the day, it's a relationship. And a relationship in which both parties communicate can be a healthy one.

Never fear your bank or credit company. Never think you can't reach out to them and ask for things like a credit limit increase. The absolute worst thing they can do is tell you no. And the best thing is they give you what you want and more (it can and does happen!). If you want to better leverage your relationship with your bank or credit card company, keep a habit of keeping all of your accounts in good standing and leaving them open. That way, when you call them and they look up your history with them, they'll see that you've been a good customer and they'll be motivated to keep you that way.

Yes, there will be times when they actually don't have the power to help you, but a "no" can always be a "not now." If you call your bank and ask for a credit limit increase and they tell you that they can't approve you, you might still get a "yes" in a few months if your credit score goes up and as your account with them ages.

Remember, today's "no" could most certainly be next quarter's "yes." So keep working towards your goals no matter what.

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