How to Raise Your Credit Limit
1. Pay your bills on time
This is the easiest way to increase your credit card limit. Every six months or so, credit card companies review your credit and decide if your limit should be higher based on how you’re handling your money. If you pay on time — and pay off the balance every month — they should offer to raise your credit limit.
2. Ask the card company to raise your credit limit
Sometimes credit card companies won’t offer a raise, so ask for one.
Credit experts suggest that you only ask for an increase when you’ve paid your bills promptly. They also recommend waiting at least six months after you received the credit card and asking for no more than a 10% to 25% increase. Asking for more than 25% might raise questions about your intentions.
You also should use your credit card frequently and pay off the balance when it’s due. This suggests you might have a legitimate need for a higher borrowing limit and that you’re capable of paying on time.
3. Apply for a new card with a higher limit
One option is to start from scratch. Apply for a new credit card with a new company that has a higher credit limit. Note that if you close the old credit card it will affect your credit history, which makes up 15% of a FICO score. That would cause your credit score to go down. You can always keep the card open and not use it. That would help protect your credit history.
4. Balance transfer
A balance transfer is when you take the money you owe on one card and move it to another card. Ask your credit card company to raise your credit limit to make way for a balance transfer.
The card company would be willing to do this in order to keep the debt on their books rather than a competitor’s. In fact, some companies offer no interest for a period of time (usually six to 12 months) to incentivize a balance transfer.
But be wary of two things: transfer fees and introductory rates. The transfer fee may wipe out any benefit you would get from the no interest promotion. Be sure to pay off the balance before the promotion ends. Otherwise, you risk losing a lot of money when the real interest rate – often somewhere around 25% — kicks in.
5. Roll two cards into one
Some credit card companies will allow you to combine two of your credit cards into one as long as they issued both cards. You pick the one with the better benefits or longer credit history and close the other one. The catch is that both accounts have to be open for at least six months, and the card that is closed has to be paid off. Again, closing a credit card will affect your credit history. This technique isn’t for those who want to raise their credit limit as a way to raise their credit score.
6. Increase your income
The more money you make the more comfortable a credit card company will feel extending your credit limit. When you receive a raise, chances are good that – upon request – your credit card company would be willing to raise your limit. You can also pick up a side job as a way to raise your income and thus raise your credit limit.
Tips for Raising Credit Card Limits
Only ask for increases on one card at a time.
If you have five cards and are requesting higher limits on more than one of them, each request is considered a “hard inquiry” on your credit score, which automatically lowers it a bit. Multiple credit inquiries also suggest you have an urgent need to borrow a lot more money, something that makes lenders nervous. Allow about two months between each request to diminish the effects of a hard inquiry.
Pick your best card
Since you can only do one card at a time, start with the best one. That should be the credit card with the best benefits and the one you use most often.
When not to ask for a credit limit raise
If you recently suffered a loss of income, chances are not good for a credit raise. Also, card companies will be reluctant to increase your limit if your credit score is low, especially if that’s because of missed payments. You’ll want to raise your credit score before you ask for a credit increase.
Why Would I Want a Higher Credit Limit?
If you’re the sort of person who puts less than $1,000 a month on a credit card, you might wonder why anyone would want a borrowing limit of 10 times that much.
The reason might not be what you think. People confuse credit limits with routine spending maximums, but in practice they’re not the same. Just because you have the green light to rack up $10,000 on your credit card doesn’t mean you should. In fact, it’s not a good idea unless you plan on paying back the money quickly.
The greatest benefit for having a high credit limit on your cards is that it could help improve your credit score. There are many benefits to having a high credit score. The higher your score, the better your interest rate on mortgages, auto loans and even student loans.
To establish your credit score, the agencies consider your credit utilization ratio — the percentage of your credit limit that you’re using at any given time. The lower your credit utilization, the better. Experts suggest spending no more than 30% of your credit limit. In fact, the highest credit scores belong to those who don’t exceed 10% of their limit.
How Is Credit Limit Determined?
Each card in your wallet has a credit limit. The credit rating agencies add all the limits together, then compare them to what you owe to arrive at a ratio. For example, if you have two credit cards and one has a $7,000 limit and the other a $3,000 limit, your credit limit is $10,000.
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