There are several advantages to increasing your credit limit. In addition to having more funds (somewhat) at your disposal, having a higher credit limit will immediately lower your credit utilization, or your debt to limit ratio. A lower ratio makes for a happy credit score, and, therefore, a happy consumer.
If you’re considering increasing your credit limit, it’s important to make sure your credit score doesn’t get negatively affected. You may be able to lower your utilization ratio, but if a company puts a hard inquiry on your credit report in the process, you’re basically back to square one.
First and Foremost…
Before anything, make sure to check your credit report. About 8 out of 10 people have mistakes on their credit reports, making for big issues at critical times if left unattended. You wouldn’t want to request an increase, have your credit pulled, and be denied based on an inaccurate score.
Next, opening a new credit card in order to have more available credit will ultimately hurt you in the long run. Your credit report will suffer as a result of multiple inquiries, and you’ll get hit with more annual fees and finance charges than an overall increase is worth. The goal is to increase your credit limit without increasing the number of inquiries on your report.
Also, don’t request an increase unless you’re using 30% or less of your total credit limit. They’ll most likely deny you if you’re using any more, so save yourself the trouble. Here are a few ways to increase your credit limit with minimal to no damage.
The Online Option
Your first option is to simply go online and request an increase. Sometimes you’ll get an increase immediately, no credit check, no problem. Too good to be true? Not really. This means the card company was planning on giving you at least a small increase anyways, so they’ll give it to you on the spot. Card companies generally don’t give limit increases until you’ve had your card for at least 6 months, so if you ask for anything before then, you’ll probably be stuck with a “come back later.”
If they don’t offer you an initial increase, they’ll ask you for information about your current employer, your current income, etc., and will probably come with a credit inquiry. Unless you actually need the extra credit, try to avoid adding another inquiry on your report.
Talk It Up
American Express and Citi offer the online request option, but you may have to call and talk to a representative. When you call, ask to speak to a supervisor so that you don’t have to waste your time talking to a rep just to be transferred over when something needs authorization. When explaining your reasons for a credit increase, it helps to mention if you plan on making a large purchase in the near future, if you’re going on vacation, or if you’re considering a balance transfer to consolidate debt.
Remember that card companies are basically assessing you ask a risk, so don’t seem desperate for the credit. Saying that you need the extra credit to pay something off or else it’ll get repossessed doesn’t look great to the company. Do your best to show that you want the increase, but aren’t in dire need of it.
Be A Model Citizen
And the most important factor in your candidacy for a credit limit increase is, of course, your overall credit worthiness. Card companies want to see that you’re a responsible borrower, so, at the risk of sounding like a broken record, always pay your credit card bill on time, pay more than the minimum, and DO NOT go over your credit limit. Never. Ever.
Most people think that if they have a few purchases and pay them on time, they’ll end up with an awesome credit score. Actually, credit companies want to see a more predictable credit history. They’re unsure about your spending habits if you only use it in emergencies, and if you originally used it for large purchases but recently have more day-to-day purchases like gas and coffee, creditors will be a little suspicious of your financial situation. Use your credit card as much as you (responsibly) can in order to create a consistent and predictable spending history.
Again, the name of the game is showing you can be trusted with credit, so do everything possible to show that you are a responsible borrower. You can reap the benefits of a higher credit limit, but always make sure you only take on as much as you can handle.
Angie Picardo is a staff writer for NerdWallet, a credit card website dedicated to helping consumers find solutions for bad credit.