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When FICO and VantageScore are putting together your credit score based on your credit report, one of the factors they look at is your credit utilization ratio, which compares the credit you're currently using against your total credit available on revolving credit accounts such as credit cards and lines of credit.
Guides on how to boost your credit score will typically advise you to rein in your credit utilization ratio by keeping your credit balances low and paying them off completely each month. This is a good piece of advice, to be sure. However, you can tug at this ratio from the other end as well by increasing your total credit available. It's also easier than it sounds. All you need to do is ask.
With all the algorithms and automated systems that drive the personal finance world, it's easy to forget how far you can get by just asking.
If you can't meet a monthly payment on a loan, you can ask for an extension. If you're not happy with your credit card's APR, you can ask your credit card issuer to lower it. And if you have a big purchase that exceeds your current credit limit, you can ask for your lender to raise the limit.
You can ask for a credit limit increase from your bank every six months. However, before you ask for a credit limit increase, there are some things you should gather first.
When banks and credit card companies make more credit available to their lenders, it's because they believe you'll be able to pay it back. Their belief in you is largely based on your credit score, which you can check for free on sites like Credit Karma, Credit Sesame, and Credit.com. Most financial institutions, such as your bank or credit card company will also let you see your credit score.
While it's good to keep tabs on your credit score, lenders will also look at how you maintain the account for which you're requesting the limit increase. They'll scrutinize your payment history and credit utilization when determining a person's credit limit. At a bare minimum, you should be making all your payments on time. They'll be more favorable toward someone who keeps their balances far below their total credit limit across all cards and pays their balance in full. If these factors are not in good standing, your likelihood of getting approved for more credit isn't great.
If you're responsible with your credit cards and move forward with your credit limit increase, you should decide how high of an increase you want to request. The typical increase amount is about 10% to 25% of your current limit. Anything further may trigger a hard inquiry on your credit. If the bank denies the request, you may be able to make a counteroffer.
Depending on the bank, you may not even have the opportunity to request a specific amount. The bank may just review your income and payment history and decide what's appropriate.
In any situation, personal finance included, it's important to look before you leap. You should understand the ramifications of applying for more credit. When a bank considers your application, they need to check your credit. They will either pull a soft inquiry, which will not affect your credit report or credit score, or a hard inquiry, which will drop your score a few points and will remain on your credit report for two years.
If your creditor pulls a hard inquiry, it could still be worth the dip in your credit score. They stay on your credit report for two years but stop factoring into your score after one year. However, if you incur too many hard inquiries over a short time span, the effect on your credit score will compound.
Note: Some banks won't grant a credit limit increase unless you've been an account holder for more than six months.
Each creditor will have nuances to their limit increase request process. Some banks will allow you to fill out a request for a credit limit increase through your online account or apply through an app. The easiest way to find this is through the site's search bar.
If you can't apply for a credit limit increase online — or you prefer talking over typing — call the number on the back of your card. Click through the automated directory until you're transferred to a customer service representative.
You need to be prepared with several pieces of information once you start the application process. Minimally, the bank will ask for your name and the answer to one (or all) of your security questions to verify your identity. They may also ask for your address and Social Security number.
You should also prepare to provide the following:
Note: Annual gross income is your income before any deductions or taxes are factored in.
Approval times can vary depending on the bank and the application method you use. You might have to wait for your approval to come through in the mail, or you might get an instant response and credit increase through online accounts or apps.
Once your credit limit increases, you will be able to make larger purchases with revolving credit and spend more without your credit utilization ratio adversely affecting your credit score. It may be tempting to spend a little more liberally, but more available credit shouldn't change how you make payments. Keeping your bills in check will make the application process smoother the next time you go for a credit limit increase.
How often can I request a credit limit increase? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
You can request a credit limit increase every four to six months, though six months is ideal. Note that you should have a spotless payment history within those months.
Can your credit limit increase on its own? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
If you've been making on-time payments and frequently swipe your card, your bank may increase your credit limit periodically. Usually, they'll ask for your approval before giving you a larger line of credit. Since the increase wasn't requested, it won't require a hard inquiry on your credit report since they've already determined that you're a responsible borrower.
What are alternatives to a credit limit increase? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
If increasing your credit limit will incur a hard inquiry, it may be worth your time to consider applying for a new credit card entirely. If you're debt-free and able to manage multiple credit cards, consider opening a new card and taking advantage of stellar introductory bonuses.
