How To Get a Higher Credit Limit: A Step-By-Step Guide
A high credit limit can offer numerous benefits, from increased purchasing power — which could come especially handy in an emergency — to an improved credit score.
While requesting a higher limit isn’t advisable if you’re having trouble paying down your credit card debt, it can be a wise financial decision if you typically don’t carry a balance month to month.
Read on to learn how to successfully request and secure a higher credit limit.
How to get a higher credit limit: a step-by-step guide
There are some things you should know before asking for additional credit. First of all, it’s important to know how credit limits are calculated in the first place.
When you apply for a credit card, the bank will review your credit score, debt-to-income ratio, credit utilization ratio and credit mix. This will help them determine whether you’re likely to repay your debts on time or if you are at a high risk for defaulting on debt.
Borrowers with good credit scores and high incomes will most likely receive higher credit limits than those with poor credit histories and lower incomes.
This means that if your credit score and income have risen since you first got your card, you have a good chance of getting a higher credit limit.
Here are the steps you need to take to request a credit limit increase.
1. Check your credit report and score
The first step is to get a copy of your credit report, preferably from all three major credit bureaus: Experian, TransUnion and Equifax. This will help you get a clearer view of your financial situation.
Note that, in order to see your FICO score — the credit scoring model most lenders use — you might have to purchase credit reports from the bureaus themselves. While many websites offer free credit reports, these typically do not include scores or might only include the score from a different and less-used scoring model, the VantageScore.
Once you have your report, it’s important to analyze it carefully, checking for negative marks and/or inaccurate items. (If this is your first time analyzing your report, or need a refresher, make sure to check out our guide to how to read your credit report.)
Note that, if you find mistakes or outdated negative items in your credit report, you should dispute these items with the credit bureaus. By law, they’ll have 30 days to investigate and must eliminate the items from your report if they’re inaccurate.
And, if you discover you have multiple errors in your report — perhaps due to identity theft or other financial issues — you could consider a credit repair company that can dispute the errors for you.
Next, you should evaluate your score and see where it falls in the ranges outlined below.
Borrowers with credit scores that fall in the very good and exceptional ranges will have the best chances of successfully requesting an increase to their credit limit. If your score falls in the “good” range but shows significant improvement since you first opened the account, your request for an increase might also be granted.
If your score is in the fair and poor range, the best thing to do is to take some time to rebuild your credit before applying for an increase.
2. Evaluate your credit card usage — and pay down debt if necessary
Your credit utilization ratio, which is an indication of how much of your available credit you’re using, plays an important role in your credit score and weighs heavily in lenders’ decisions. One quick way to raise your credit score and increase your chances for a higher credit limit is to decrease that ratio by paying down your credit card debt.
You’ll have a better chance at successfully requesting an increase if your utilization ratio is under 30%, preferably in the single digits. If you find that your ratio is too high, it’s a good idea to pay down your debt before asking for an increase.
3. Get your documentation ready
Each credit card issuer will have different criteria for credit limit increases; however, you should be prepared to provide evidence of your income and employment status in case they request it. This could be in the form of your wage and tax statements (Form W-2) or recent paystubs.
4. Check your timing
Timing can be crucial with a credit limit increase request. It’s best to avoid requesting one shortly after opening a new credit account (which can impact your credit score) or when you have high credit card balances. It’s best to pay down cards significantly and wait a few months for credit bureaus to catch up with your new, lower credit utilization ratio.
5. Contact your credit card company
Once these pieces are in place, you can request a credit limit increase in several ways:
Online. Most major card issuers offer the option to request a credit line increase right on their websites.
By mail or e-mail. Some issuers allow for written requests, which you can send via snail mail or e-mail.
Phone. Calling the number on the back of your card and speaking to a customer service representative might still be the best option, especially if you’d like to explain how your credit score and income has increased since you first opened the card. It also allows you to receive immediate feedback in case your request is denied.
What if they deny your request?
If the credit card issuer denies your request, you should ask for feedback as to why. This allows you to finetune your strategy and try again in a few months. For example, if your credit score just hasn’t improved enough, it’s a good idea to spend at least six months paying down debt and building a stronger on-time payment history and then try again.
More from Money
Our team conducts thorough research on all the brands listed on our website and may receive compensation from our partners. This research and financial considerations may impact how the brands are displayed on our site. Please note that not all brands are included in our research. To learn more, please visit our website. This ad is sponsored by Money.com and we may receive compensation if you click on it.
Having a high credit limit can offer many benefits, such as increased purchasing power and a better credit score. However, it is not advisable to request a higher limit if you are struggling to pay off your credit card debt. It can be a smart financial decision if you typically pay off your balance in full each month.
If you are considering requesting a higher credit limit, here is a step-by-step guide to help you successfully secure one. First, it is important to understand how credit limits are calculated. When you apply for a credit card, the bank will review your credit score, debt-to-income ratio, credit utilization ratio, and credit mix to determine your creditworthiness. Those with good credit scores and high incomes are more likely to receive higher credit limits than those with poor credit histories and lower incomes.
To request a credit limit increase, follow these steps:
1. Check your credit report and score. Obtain a copy of your credit report from all three major credit bureaus: Experian, TransUnion, and Equifax. This will give you a better understanding of your financial situation. Keep in mind that you may need to purchase your FICO score, the credit scoring model most lenders use, from the credit bureaus. Free credit reports often do not include scores or may use a different scoring model, such as VantageScore. Review your report for any negative marks or inaccurate items. If you find any errors, dispute them with the credit bureaus. They are required by law to investigate and remove inaccurate items from your report within 30 days. If you have multiple errors, consider using a credit repair company to help you dispute them.
2. Evaluate your credit score. See where your score falls within the ranges outlined below:
– Very good: 740-799
– Good: 670-739
– Fair: 580-669
– Poor: 300-579
If your score has improved since you first got your credit card, you have a good chance of getting a higher credit limit.
3. Contact your credit card issuer. Call the customer service number on the back of your credit card and ask to speak with a representative about increasing your credit limit. Be prepared to explain why you are requesting a higher limit and provide any relevant information, such as an increase in income or a good payment history.
4. Consider other options. If your credit card issuer denies your request for a higher limit, you can try applying for a new credit card with a higher limit. Just be aware that this may result in a hard inquiry on your credit report, which can temporarily lower your credit score.
Remember, a higher credit limit can be beneficial, but only if you use it responsibly. Make sure to only charge what you can afford to pay off each month and avoid carrying a balance. This will help you maintain a good credit score and avoid accumulating debt.
Source:Read More