How to increase your credit limit easily

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Have you ever wondered how your credit limit stacks up compared to the rest of the country? Recent data from Experian® found that the average credit limit for Americans is about $28,930, with Baby Boomers having the highest average credit limit at $40,318. Now, you may wonder how to increase your credit limit to get closer to the average, but raising your limit isn’t for everyone.

A credit limit increase can help you build your credit, but it can also increase your debt. To take advantage of the increase, it’s helpful to know the dos and don’ts of raising your credit limit.

In this post, you’ll learn how to increase your max credit limit and gain some helpful tips to work on your score and keep you out of too much debt.

How is my credit limit determined?

Your credit limit is determined by various factors such as your credit history, current amount of available credit, income, and other factors relating to your finances. If it’s your first credit card, the primary factors will be your credit score and income. It’s also helpful to remember that each card issuer is different and may make their credit limit decisions in their own way.

If you’re just getting started with building credit or trying to repair your credit, you may want to start with a secured credit card. With a secured credit card, you build credit by using your own money. When you make your initial deposit, that amount becomes your credit limit.

How can I increase my credit limit?

Your credit limit on a given card determines how much money you can charge to that particular card. In addition to allowing you to borrow more money, this can have an impact on your total available credit, which can also affect your credit health.

If you’re looking to get a higher credit line, you have the following three options:

• Ask your card issuer: For most cardholders, there’s a good chance you can request to increase the limit of a credit card online or by phone directly through the issuer.
• Apply for a new credit card: If you’re in good standing with your current credit card(s), you could be eligible for a higher starting limit with a new credit card.
• Wait for automatic credit limit increases: Alternatively, you could simply wait for an automatic increase, which some card issuers do for cardholders who maintain good standing over time. You can always check with your issuer to see if this applies to the card in question. Keep in mind that credit card companies can enact a credit limit reduction without warning as well.

In addition to these methods, you can also accept a new credit card offer from a different credit card issuer. As you continue to build your credit, you may receive additional offers from new companies.

What are the benefits of a higher credit limit?

Once you receive a credit line increase, you may not recognize the benefits right away, but there are some advantages to raising your limit. The following are some of the biggest benefits:

• More available funds: This is the most obvious benefit, but when you raise your credit limit, you have access to more funds. This can be helpful in an emergency or if you need to make a big purchase.
• Decrease your credit utilization: Credit utilization is 30 percent of your FICO® credit score. This is the difference between what you owe and your available credit. As long as you don’t increase your spending too much, a credit limit increase should lower your utilization.
• Debt consolidation: If you have multiple credit cards, you may be able to do a balance transfer to consolidate your debt. This simplifies making payments, and you may get a lower interest rate.
• More options: When you have a higher credit limit alongside a good credit score, you may be able to get better terms for future credit cards and loans. The increase may result in lower interest rates and savings when getting a home or auto loan.

Are there downsides to an increased credit limit?

Before requesting an increase, it’s also helpful to understand the potential disadvantages of increasing your credit limit:

• Increases borrowing temptation: A higher credit limit could encourage you to borrow more money, which could lead to more debt or a ding in your credit as your utilization percentage increases. Late payments stay on your credit report for up to seven years and can lead to late fees, so it’s best to avoid them if possible, by resisting any desire to over-borrow.
• Decreases credit score temporarily: As noted earlier, applying for a credit limit increase could come with a hard credit inquiry, which will temporarily hurt your credit.
• May lead to interest payments: If a higher limit leads you to take out more debt without an increase in your income to match it, you could find yourself paying interest on greater loan amounts if you aren’t able to pay your balance in full every month.

How to request a credit line increase

If you decide to request an increase to your credit limit, the best way to do this is by going through your card issuer. It’s a fairly simple process and sometimes, you can do it online.

• Step one: First, check your credit score and see if it’s good enough to request an increase. “Good” is relative, so if your score has increased since you first received the card, it may be time to ask for an increase. If you have a lower score, the chances of a denial are higher.
• Step two: Ensure that increasing your credit limit aligns with your financial goals. Are you using the increase to improve your credit or to have more purchasing power? These are good financial goals to work toward.
• Step three: Finally, request a credit limit increase. Some credit card issuers allow you to request an increase online and will give you results immediately. You can also call the card issuer.

What if my request for a credit limit increase is denied?

Should your credit limit increase result in a denial, don’t worry. While it may not be the result you hoped for, you’ll have an opportunity to request one in the future. When you’re denied, your credit card issuer will often send you something in the mail that lists the reasons for the denial.

Some of these reasons may include:

• Low credit score
• Derogatory marks on your credit report, like missed payments
• Low income
• Short work history
• High credit utilization ratio

Should I increase my credit limit?

As mentioned in the steps to getting a credit limit increase, it’s helpful to ensure that you have a good reason for requesting the increase. If you simply want a credit limit increase to purchase items that you don’t necessarily need and will put you further in debt, you may want to reconsider the increase.

An increase to your credit limit should ideally align with your long-term financial goals. Whether it’s improving your credit, decreasing your utilization ratio or simply giving you some peace of mind in case of emergencies, these may be good reasons to get an increase.

Credit limit increase FAQ

The following are some of the common questions people have when they’re thinking about increasing their credit limit.

Does increasing credit limit affect credit score?

A credit limit increase can affect your credit score positively or negatively, but some of this is in your control. Once you have the increase, if you pay on time and keep your utilization low, it can improve your credit over time.

What happens if you go over your credit limit?

If you go over your credit limit, the purchase may not go through. If the payment does go through, you may have to pay additional fees. It may also hurt your credit score. Fortunately, the  Credit CARD Act of 2009 ensures you can’t be charged overage fees without your permission.

What is a good credit limit?

There’s no set answer for what a good credit limit is because it can differ for each person. Ideally, a good credit limit provides you with enough funds to live comfortably while also being able to maintain a good credit utilization ratio.

How to improve your chances of a credit limit increase

Now that you better understand credit limit increases, you know that it’s important to know your credit score before applying. If you apply for an increase with poor credit, you’re more likely to get denied.

Fortunately, here at Lexington Law Firm, we offer a free credit assessment that you can sign up for today. This allows you to check your credit health before applying for a credit increase or a new line of credit. If you have inaccuracies on your credit report, you can sign up to become a client, and we’ll challenge the errors on your behalf.