There are many strategic tactics you can take advantage of to build your credit score. Some, like paying your bills on time each month, take a while to actually register as positive momentum in that magical number. However, others are relatively quick fixes that can easily give your credit the boost you’re looking for.
Asking for a credit limit increase is one of those simple tips. It takes just a few minutes on the phone and could very well raise your credit score within the next 30 days.
This is a brilliant move if you’re trying to improve your credit to qualify for a loan or get better interest rates. But like any strategy, you need to put a little thought behind how you do it.
Here’s the lowdown on when it’s a good idea to request a credit line increase and how to prepare yourself for the conversation with your credit card issuer for the best chance of success.
Benefits of a Credit Limit Increase
Before you call your credit card company requesting a credit limit increase, it’s important to understand how this move affects your credit.
Credit utilization is the amount of credit you have access to compared to the amount you actually use.
Most financial experts agree that it’s ideal to keep that ratio under 30%. Obviously, the lower, the better.
How does this affect your credit? On the FICO scoring model, which is the most widely used among lenders, the “amounts owed” category accounts for 30% of your credit score. That’s a big percentage and is only second to your payment history.
When you lower the amount of money you owe to creditors and lenders, you automatically improve your credit scores. By increasing your credit limits, you can decrease your ratio without even making any extra payments on your current debt.
Which Card to Choose
It’s time to figure out which credit card you should choose to request a credit limit increase on (assuming you have more than one). Start by picking a credit card you’ve had for a long time, which has a low or zero balance.
You’ll want to demonstrate to the credit card issuer that you’re a responsible borrower, so make sure you’ve been consistently making at least the minimum payment on your account each month.
How to Ask for a Higher Credit Limit
Once you’ve selected your card, it’s time to call customer service. (With some credit card issuers, you can also submit a credit limit increase request online.)
If you’re nervous, jot down some talking points before you pick up the phone. Mention to customer service that you’ve been a loyal customer for several years (be specific on how long) and note that you always make your payments on time and carry a low balance.
They might ask you why you want a credit limit increase. You can be honest. You’re simply working on building your credit and would like to lower your credit utilization ratio.
You might get a few more questions about your current financial situation. Be prepared to talk about your employer, how long you’ve worked there, and your annual income.
Be polite and patient with them and chances are, you’ll get that extension you’re looking for. It’s quite simple and when it comes down to it, most people are just afraid to ask.
When to Request a Credit Limit Increase
Even when you prepare for the call ahead of time, there are circumstances in which your odds of success can be greatly improved. If you’re thinking about asking for a higher credit limit, you’ll want to consider it even more if one of these situations has come up or if you’re expecting one to happen soon.
#1: A Recent Credit Boost
Maybe you’ve been monitoring your credit scores and have noticed they’ve gone up. Or perhaps you had some disputes successfully resolved. Either way, a credit line increase will be much easier with strong credit.
Card issuers assume that if your credit score is good, you’re better able to stay on top of your payments. Of course, we know that the secret to financial security is never charging more than you can afford. Be sure not to overspend if you do get that credit line increase.
#2: Strong Credit History
Credit card issuers certainly look at your holistic credit history, but they’re especially concerned with how well you’ve handled your payments with their specific card. First, make sure you’ve been a customer with them for at least six months.
Any account younger than that hasn’t had enough time to establish a trusted pattern of on-time payments. Next, look at how you’ve been spending on that card. If you’ve kept the balance low and made your payments consistently, you’re in a good place to request a credit limit increase.
#3: Recent Pay Raise
Did you recently get a pay raise or promotion at work? If so, you can leverage that extra income to qualify for a larger credit limit.
Depending on your credit card issuer, you may need to wait until you’ve received an updated paystub or other documentation showing the raise. Again, always be sure to use your credit cards responsibly and don’t overspend — think about where you can boost your savings as well.
When to Avoid Requesting a Credit Limit Increase
Card issuers also view a few scenarios as potential red flags, making it unwise to ask for a credit limit increase in these situations. One is if you’ve recently lost income or taken on a lower-paying job for some reason. A smaller income could denote a higher debt-to-income ratio or lead a card issuer to believe you’re less financially secure. Either way, you likely won’t get your credit line increase approved.
The same holds true if your credit score has dropped. This could be because of late payments, multiple recent requests for new lines of credit, or even identity theft. The best course of action is to make sure that you’re aware of what’s causing the decrease. Do your best to rectify the situation before applying for a credit extension.
Also, remember that a credit limit increase request may trigger a hard inquiry. If you’ve had too many inquiries in the past 24-48 months, it might not be a good time to submit a request. If this is a concern, be sure to ask the credit card issuer if it will cost you a hard inquiry or not.
Use the New Credit Limit Responsibly
Credit limit increases are best for people who already use their credit cards responsibly. Having access to more credit does not equal permission to spend it, even if you can afford the monthly payments.
Remember that you’ll be paying interest on everything you buy using your credit card if you don’t pay off your balance in full each month.
Plus, your credit utilization ratio will skyrocket, quickly hurting your credit. That defeats the whole purpose of getting the credit extension in the first place. It only takes one quick mistake to cause your credit score to plummet, but it takes a lot of time and effort to restore it.
Credit Card Rewards
That being said, as long as you’re financially responsible and regularly pay off your balance each month, you might consider using your credit cards for everyday purchases such as groceries and gas. You’ll benefit from increased rewards points that might actually save you money in the future, whether through cash cards or discounts on vacations.
Many experts agree that actually using your revolving credit is better for your credit than not using your credit cards at all. It’s a complicated algorithm that might not be exactly the same for everyone, but you can always count on the bottom line: don’t charge more than you can afford, and pay your balance in full each month.
What to Do If Your Credit Limit Increase Request Is Denied
In an ideal situation, you’ve prepared your talking points and the customer service representative is happy to raise your credit limit. However, it’s not the end of the world if your credit limit increase request is denied.
Perhaps your current balance was too high or your monthly income wasn’t quite enough to support the increase in credit. The good news is, once you find out, you can take steps to remedy the situation. Take a few months to pay off some extra credit card debt, then try again.
Credit Card Reconsideration Lines
You may also want to consider the credit card issuer’s reconsideration line. This generally only works when you’re applying for a new credit card, but it’s worth a shot. They can possibly get your request approved or at least tell you why it was denied.
Or request a raise from your boss — after all, now you have practice asking for what you want! If the credit card issuer mentions items on your credit report as an issue, be sure to get a copy and look things over for yourself.
Improve Your Credit Scores
You should also access your credit reports to make sure everything on there is up-to-date and accurate. If you have several items that you think should be removed, consider hiring a credit repair firm. Here are some reviews of our top picks.
They know the legal ins and outs of dealing with credit card companies to make sure that all outdated and incorrect information is fully discharged — all of which contributes to improving your credit.
Once you’ve got everything correct, try contacting your credit card issuer again to see if you qualify this time. As the old adage goes, the squeaky wheel gets the oil.