To increase your credit limit, 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 card holders can easily request an increased credit limit from their credit card issuer online.
Sometimes, the quickest way to increase your credit limit is to obtain a new credit card. Often, your new card will come with a 0% introductory annual percentage rate (APR) and an intro bonus reward offering. You can find a new credit card that fits your needs by reviewing all the top credit card offers here.
When considering how to increase your credit limit, there are five steps you should follow.
1. 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 providers 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.
2. 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.
3. Know Your Credit Score Range
The best way consumer and business owners can increase credit limits is to know their credit score range and understand why it’s important to maintain an excellent credit score. Personal credit scores range from 300 to 850.
Your personal and business credit score change frequently based on your payment history, recent activity, debt-to-income, and your credit utilization ratio. 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 at 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. Often, the two scores 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 employee identification number.
4. Request a Higher Limit From Your Provider
After you have done the first three steps in preparation to increase credit limits, you can request a higher limit from your provider, such as Wells Fargo, Citi, U.S. Bank, and TD Bank. Most providers let you do this by simply 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 provider. Some credit providers 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 provider will generally notify you of their decision via an online message, email, or letter.
5. Apply for a New Card With a Higher Credit Limit
Sometimes, the easiest way to receive an increased credit limit is by applying for a new credit card altogether. 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 providers and card options. You have the flexibility of choosing another card through your current provider or applying through a new credit provider.
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. However, If you’re a business owner with a personal credit score below 670 we recommend considering a fair credit business card.
How Credit Card Providers Decide to Increase Credit Limits
Most credit card providers evaluate your creditworthiness as a borrower when they are considering whether to increase your credit limit. Providers measure your creditworthiness by looking at several factors including your credit report, personal credit score, and cash flow coverage ratios, amongst other factors. The better you look as a borrower, the more likely you can receive a higher credit limit.
The factors providers look at when reviewing your credit limit increase request are:
- Credit report: By evaluating your credit report, providers can see your payment history and determine if you make timely payments; they also look at things such as any collections, prior defaults, judgments, tax liens, and other public records
- Personal credit score: Most card providers have a cutoff for the personal credit score they will accept, which varies per card; it’s important to maintain a good personal credit score of 640 or higher if you want to request a higher credit limit
- Debt-to-income (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.
The items listed above essentially make up the 5 C’s of Credit, which is a method lenders use to help understand your ability to handle debt obligations a system most bank and credit. Sometimes, providers deny credit limit increase requests due to late payments, high levels of debt, too many hard inquiries, or how recently your newest account was opened. Luckily, there are some actions you can take if your request gets denied.
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 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 providers will let you know why you were denied a credit limit increase; review their denial letter and fix the issues they lay out
- Reduce debt-to-income: Pay down your existing debt or find ways to earn more income to reduce your debt-to-income ratio; your DTI ratio shows credit providers your ability to pay your debt obligations
- 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 from another card: Sometimes, you may be denied due to poor account history on a specific card; if you have another card with 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
Although applying for a new credit card is an option, too many new applications can cause a surplus of hard credit inquiries on your credit report. Too many hard credit checks and inquiries on your credit report can have a negative impact on your score. Generally, a hard inquiry will ding your credit score by one to five points and will stay on your credit report for two years.
To understand more, we interviewed Mark Mandula, chief marketing officer at United Capital Funding, who said:
“If you are rejected or declined, seek out in writing the reasons why this happened. Approach the process of determining the cause professionally and as difficult as it might be, without emotion or angst. Also, take the decision as a catalyst to look at ways to improve your credit score by getting educated about what impacts your credit, as I have outlined below. Set some personal and business goals about where you want your score to be in the future when/if you reapply.
“There are only six key variables that impact your personal credit score. They are in order of importance; payment history (35%), amount you owe, (30%), length of credit history (15%), new credit (10%), and credit mix (10%).”
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 Scores Are Impacted If You Increase Credit Limits
Generally, increased credit limits will help and improve your credit score over time by reducing your credit utilization ratio. However, some providers will run a hard credit check for larger requests, and this could reduce your personal credit score between one to five points. It’s important to note that hard inquiries will only impact your personal credit score and not your business scores.
Personal Credit Score
As noted, one of the key factors in determining your personal credit score is your credit utilization ratio. A credit utilization ratio below 30% and greater than 0% 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 provider runs a hard credit pull. These types of credit checks typically only have a negative impact on 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
The pros of increasing your credit limit are:
- 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
The cons of increasing your credit limit are:
- 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 with how you use it
- Possible cash trap: If you can’t pay off your higher credit limit, you can easily begin to accrue interest; 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 that request an increased credit limit and spend their credit wisely can easily avoid the cons of a higher credit limit.
Frequently Asked Questions (FAQs) About How to Increase Credit Limits
We covered a lot of steps on how to increase credit limits and what providers typically consider. Some questions are asked more often than others, and we address those here. If you have any other unanswered questions, please feel free to share them on our FitSmallBusiness forum, and we’ll provide an answer.
Is It Better to Have a Higher Credit Limit?
A higher credit limit is good if you need access to more capital and you know that you’ll be able to pay your balance down. If you don’t trust yourself with a higher limit, some credit cards allow you to set spending limits which can help protect you from overspending.
Can Banks Increase Credit Limits Automatically?
Some providers will review your account and increase your credit limit automatically if you manage your credit responsibly. This means using a small percentage of your credit limit and making timely payments. The easiest way to increase credit limits is by submitting a request because not all providers will increase credit limits automatically.
How Often Should You Request Credit Limit Increases?
After you increase credit card limits, you generally have to wait between six to 12 months to request another increase depending on your provider. You should only request another increase if you are in need of a higher limit, you want to improve your credit score, and you know you can manage a higher limit.
How Do I Increase the Credit Limit on a Secured Credit Card?
If you’re an individual with a secured card, you can increase credit limits by increasing your original security deposit. Because your secured credit card limit is equal to your original deposit, pledging more cash as collateral would increase your credit limit. It’s important to note this is only an option for secured credit cards.
The Bottom Line
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.
Business owners looking to apply for a new small business credit card can use our credit card marketplace. Through our marketplace, you can search and compare different card options to help find the best card for your business needs.