Credit cards help you keep up with your monthly bills. But what happens if you need extra cash now and are at your limit? You may be considering a credit line increase. Read on to find out how long it takes to increase your credit limit.
Benefits of a credit limit increase
A larger credit limit raises your purchasing power. If the approval process is fast, you could have access to more credit immediately. Yet increased spending power is just one of many benefits of a credit limit increase.
Lower credit utilization rate
When used wisely, a higher credit limit could push your credit score. Your credit utilization rate determines nearly 30% of your credit score. This ratio examines the amount of credit used compared to your total available credit. A lower percentage is better for your credit score. When your available credit increases, but your spending stays the same, your credit utilization ratio drops. This could lead to a higher score.
Earn more credit card rewards
Your increased limit gives you more credit to work with. If you have monthly bills you pay by check or out of your bank account, why not charge them? You will earn more credit card rewards on expenses you would pay for anyway. Just make sure you pay off your credit card balance in full each month to avoid interest.
Helpful in emergency situations
Emergency repairs and unexpected trips can strain your finances when money is tight. An increase in your credit limit gives you extra funds to work with.
Allows for larger purchases
Your credit card may offer price protection, warranties, or coverage for lost or damaged goods, which can be useful when making large purchases. If you use your credit card for a large purchase, pay the balance in full to avoid fees.
Easier to secure future loans
Minimizing your credit card usage can improve your credit score. It can make it easier to get credit, and you might qualify for lower interest rates.
Are credit limit increases automatic?
When you prove that you use your credit responsibly, some credit card companies may put through an automatic credit limit increase. Other credit card issuers only consider an increase in the credit limit when you ask.
Some issuers do a soft or hard pull of your credit report, so it’s a good idea to find out how the process works before you ask for a credit limit increase. A soft pull won’t affect your score, but a hard pull can lower your score because it may appear in your credit report for at least two years.
How often should you ask for a credit limit increase?
Your credit card issuer should tell you in writing why they rejected your request. Once your financial situation changes, you may want to try again.
When to consider a credit limit increase
If you have a good chance of getting approved, it may be time to ask for an increase in the credit limit.
You’ve had a boost in income
Your increase in income gives card issuers comfort that you have the financial means to repay what you owe.
Your credit score has improved
The higher your credit score, the more likely you are to be approved for an increase. If your score improves, it may be time to ask for more credit.
Your payment history is strong
Card issuers consider how well you manage debt when raising your limit. When you have a long history of timely payments, your chances of getting approved for an increase in the credit line will improve.
You’ve paid off debt
Your credit card issuer may compare your monthly debt payments to your income. This is known as your debt-to-income ratio. This ratio drops as you pay off debt, which may make it easier to qualify for a credit increase.
You haven’t recently applied for credit
If it has been a few years since you applied for credit, it might be a good time to ask for a limit increase. Your credit score may not be impacted even if you get turned down.
Factors that could hurt your chances of a credit limit increase
You should try to time a credit limit increase when you are likely to get approved. If the situations below apply, it may be better to wait.
You’re unemployed
Credit card issuers are likely to look at your income to decide whether to extend an increase in the credit limit. Not having a steady job can affect your chances of getting a credit line increase.
Your credit score has dropped
If your score dropped because you are behind in payments or have too much debt, your request could be rejected.
You’ve recently applied for financing
Lenders are less likely to increase your credit limit if they know you have applied for financing with someone else. This may indicate that you are overextended or need to borrow money quickly.
You have inquiries or late payments on your credit report
Late payments and multiple requests can make it challenging to get more credit as they drop your score. Falling behind in payments or seeking credit elsewhere can signal to a lender that you may not be able to pay what you owe.
Is a credit limit increase right for me?
A credit limit increase comes in handy when you need more spending power. If used wisely, an increase in credit can improve your credit score and future financing opportunities. But it is essential to consider your financial situation before pursuing a credit limit raise. If your circumstances are such that you might be turned away, it might be better to wait.
FAQ
How many points does a credit limit increase affect your credit score?
The way you use a credit limit increase affects your score. If you keep spending the same after your limit has been raised, your credit utilization ratio improves, and your credit score could rise. But if your spending increases, your credit score may stay the same.
How easy is it to get a credit limit increase?
The ease of getting a credit limit increase depends on your financial situation. If you have a decent credit score and a history of good credit practices, such as paying your bills on time and minimizing what you owe, your chances of increasing the credit limit will improve.
Is there any downside to increasing your credit limit?
Increasing your credit limit may have drawbacks. If the lender pulls your report hard, requesting an increase can ding your credit score. If your spending increases, you may have more debt than you can handle.
