by Maurie Backman | Aug. 25, 2019
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If you apply for a credit card when you have a low income and limited credit history, you’ll end up with a low credit limit. And that makes sense. A credit card issuer isn’t going to grant you a $10,000 limit if you’ve never had a credit card before or if you don’t earn enough to pay bills that high.
But as your credit history gets more robust and your income rises, you can ask your card issuer to raise your limit. Maybe you’ll go from a $2,000 limit to a $3,000 limit, or make a larger jump from $4,000 to $8,000. No matter what sort of a boost your credit limit gets, it can work to your benefit.
Here’s why it pays to make that call and request that boost.
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Credit utilization is an important factor in calculating your credit score. Utilization speaks to the amount of available credit you’re using at once. For your credit score to stay in healthy territory, it needs to be 30% or less.
If you have a $4,000 balance and a $10,000 credit limit, you’re at 40%, which isn’t good. But if you get your credit card limit raised to $12,000, you’ll be back in favorable territory (30%).
It’s a good idea to have an emergency fund with enough money to cover at least three months of essential living expenses. This way, if an unplanned bill pops up or you lose your job, you’ll have savings to tide yourself over and you won’t rack up tons of credit card debt due to a string of bad luck.
But not everyone has an emergency fund. If you don’t, a higher credit card limit gives you more options for charging unanticipated and unavoidable expenses. And while that’s less ideal than dipping into a savings account, it’s an important lifeline to have.
If you earn a high enough income and have a decent enough credit score to warrant an increase in your credit limit, a call to your credit card issuer will generally suffice in getting that granted.
But be careful -- a higher credit card limit can open the door to more spending. And if you fall into that trap, you’ll wind up not only hurting your credit score, but also giving yourself less leeway to pay for emergencies when they arise.
A good bet is to get your credit card limit increased but pretend it never actually happened. This way, you’ll be less likely to go overboard.
If you really don’t trust yourself not to max out your credit card once your spending limit increases, don’t make that call to your issuer. But chances are, if you’re that irresponsible with your credit card usage, you won’t be in a position to qualify for an increase anyway.
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