If you want to learn how to increase credit limits, know that you’ll typically need a credit score above 680, a low amount of debt relative to your income, and a timely payment history. Additionally, your existing credit cards should not be maxed out. Responsible cardholders can request an increased credit limit from their credit card issuer online easily.
When learning how to increase credit limits, follow these five tips.
1. Request a Credit Limit Increase From Your Issuer
To increase your credit limit, you can request a higher limit from your issuer, such as Wells Fargo, Citi, U.S. Bank, and TD Bank. Most let you do this by logging into your online banking account and requesting an increase through their online portals. When you’re requesting a higher limit, you typically will need to provide your personal information, financial information, and the total credit limit you’re requesting.
The time it takes to have your request approved or denied will vary by issuer. Some companies will provide a decision instantly for a smaller request. However, it could take several days to receive a decision for larger requests. If the approval isn’t instantaneous, the issuer will generally notify you of its decision via an online message, email, or letter.
2. Apply for a New Card With a Higher Credit Limit
Sometimes, the easiest way to increase your credit limit is by applying for a new credit card. Whether you are in the market for a personal credit card or small business credit card, applying for a new credit card gives you the flexibility to choose from multiple different issuers and card options. You have the flexibility of choosing another card through your current card company or applying through a new credit issuer.
Apply for a High Credit Limit Business Credit Card
Small business owners also have the option of applying for high limit business credit cards. These credit cards give companies with monthly expenses between $15,000 and $100,000 the ability to put both large purchases and everyday expenses on one card. Some of the best high limit cards also offer introductory rewards and ongoing bonuses.
3. Use Your Credit Card Responsibly
Credit limit increases are generally easier to come by if you use your credit card responsibly and have a good personal credit standing. Some credit card issuers review your account after six months and may increase your limit automatically based on how you’ve used your credit card. If you are someone who makes late payments often, you’ll most likely not receive an increase in your credit limit.
Some responsible practices include paying off your balance early or on time, avoiding carrying a balance, and keeping your credit utilization ratio low. Your credit utilization ratio is a snapshot of how much of your total available credit you’re using across all of your credit cards.
4. Maintain a Good Credit Score
One of the best ways you can increase your limit is to maintain a good credit score and know your credit score range. Personal credit scores range from 300 to 850, and a good score is considered to be 670 or more. If you haven’t checked your score in the past six months or if there have been significant changes in your circumstances recently, it’s a good idea to check where your score is now.
How to Check Your Credit Score
The easiest way to know your personal credit score range is to check it as often as once every quarter. Consumers can check personal credit scores for free through different credit card issuers and providers without impacting your personal credit score.
When you’re preparing to check your personal credit score, it’s important to note you will need to provide your name, address, date of birth, and Social Security number. In some cases, you may also need to provide previous addresses and information, such as the amount of your mortgage payment.
How to Check Your Business Credit Score
If you’re self-employed or own a small business, you’ll want to check your business credit score in addition to your personal credit score when requesting a business credit card limit increase. The two scores often are intertwined. This is especially true in the case of FICO’s LiquidCredit score. In addition to your personal information, expect to provide the name of the business, address, and employer identification number.
5. Keep Your Credit Utilization Ratio Below 30%
Your credit utilization ratio is a calculation of your total credit balance divided by your total available credit limit. A high ratio can indicate that you’re overspending or that you’re failing to pay off your debt obligations and will likely prevent you from being approved for an increased credit limit. A ratio between 0% to 30% is a good rule of thumb.
Some of the best ways to keep your credit utilization ratio low are:
- Pay off your balance
- Avoid closing credit cards
- Make multiple payments per month
- Set balance alerts
Your credit utilization score will lower itself naturally if you are approved for a limit increase or a new card, as long as you don’t immediately carry balances on the cards. These are just some of several different tips that can help you improve your credit utilization levels. It’s a good idea to maintain a low credit utilization ratio because it’s one of the most important factors that make up your credit score.
What to Do If You’re Denied a Credit Limit Increase
Some steps you can take if you’re denied a credit limit increase including fixing the issues described on your denial letter, reducing your debt-to-income (DTI) ratio, reviewing your credit report for errors, requesting a credit limit increase from another card, or applying for a new card altogether.
Some actions you can take if your credit limit increase request is denied are:
- Fix issues noted in the denial letter: Most card issuers will let you know why you were denied a credit limit increase. Review their denial letter and fix the issues they list.
- Reduce DTI ratio: Pay down your existing debt or find ways to earn more income to reduce your DTI ratio. Your DTI ratio measures the percentage of your monthly debt payments to your monthly gross income. Most card providers use this ratio to ensure you have enough income to pay your credit balance.
- Review credit report for errors: Order your personal credit report and review it for any errors. If you find errors, submit a dispute letter with your card provider.
- Request an increase on another card: Sometimes, you may be denied due to poor account history on a specific card. If you have another card with an excellent account history, you can try requesting a credit limit increase on that card.
- Apply for a new credit card: A quick way to increase your credit limit is to get a new credit card. Some of the best credit cards have introductory bonus offers and no-interest periods.
If you know you need to increase your credit limit, prepare for it, and use your credit cards responsibly to help you get approved. Make your monthly payments on time, use your credit responsibly, and pay down a significant amount of the balance, and reduce any new credit card applications leading up to your request.
How Credit Limit Increases Impact Credit Scores
Generally, increased credit limits will help improve your credit score over time by reducing your credit utilization ratio. However, some issuers will run a hard credit check for larger requests, and this could temporarily reduce your personal credit score by several points. Note that hard inquiries will only impact your personal credit score and not your business scores.
Personal Credit Score
One of the key factors in determining your personal credit score is your credit utilization ratio. A credit utilization ratio below 30% is considered to be good. If you increase your credit limit, you will improve your credit utilization ratio. In time, this will have a positive effect on your credit score and improve your overall score.
However, your personal credit score can decrease if your card issuer runs a hard credit pull. These types of credit checks typically only hurt your score for a year but will remain on your credit report visible to other creditors for two years.
Business Credit Score
Similar to your personal credit score, one of the main contributing factors that help determine your business credit score is also your credit utilization ratio. So, if you can increase your credit limit on your small business credit card, you will see an increase in your business credit scores.
In contrast to your personal credit score, a hard credit check won’t impact your business credit score. Anyone can pull your business credit report as long as they have your business’s name and address. Since it’s easier to check a business’s credit, you won’t be penalized for inquiries on your business credit report.
Pros & Cons of Increasing Your Credit Limit
Increasing your credit card limit can help consumers and business owners gain access to more capital. Higher credit limits can provide more spending power, improve your levels of credit utilization, and create an emergency spending cushion. However, you risk taking on more debt, dealing with interest, and receiving a hard inquiry on your credit report.
Pros of Increasing Your Credit Limit
- More spending power: With a higher credit limit, you will have access to more capital, which will give you more opportunity to use your credit card for larger purchases or more frequently before paying the balance down.
- Lower credit utilization ratio: An increase in your credit limit will decrease your overall credit utilization ratio and your credit utilization level for that specific card, which will improve your credit score because it’s the second most important factor of your credit score.
- Create an emergency spending cushion: Having a credit limit that is well above your typical expenses gives you a resource to use in case of an emergency that you can’t pay for with cash.
Cons of Increasing Your Credit Limit
- Higher risk of debt: With more available credit, you risk putting yourself into more potential debt. Having access to more capital can be harmful if you’re not responsible in how you use it.
- Possible cash trap: If you can’t pay off your higher credit limit, you can begin to accrue interest easily. Any balances that are carried over from the previous billing cycle will be hit with interest charges until they are repaid. This can become a habitual cycle of always owing interest, taking away what you could put toward your principal amount.
- Hard inquiry on credit report: Most credit card providers will run a hard credit check when you request to increase your credit limit. Hard credit checks can hurt your personal credit score by one to five points, but only impact your credit score for one year.
Understanding how to increase credit limits and use your new limit responsibly can determine if it will be beneficial or not. Those who request an increased credit limit and spend their credit wisely can easily avoid the negatives of a higher credit limit.
Increasing your credit limit can be done by using your cards responsibly, understanding your credit score, keeping your credit utilization ratio between 0% and 30%, and submitting a request through your provider. Providers will evaluate your creditworthiness to determine if you can manage a higher limit. You can also apply entirely for a new credit card that has a higher limit.