Your credit limit, also known as your credit line, is the maximum amount that you can spend with your credit card. If you'd like to have more available credit, it's possible to get a credit limit increase. In addition to giving you more buying power, this can also improve your credit score. Below, you'll find out how to increase your credit limit, as well as the pros and cons of doing so.
Here's how to increase your credit limit:
Besides your income, you may also be asked for your current monthly housing payment and the credit limit you want. It depends on the card issuer, as each one handles credit line increases a bit differently.
You should get a decision immediately. If your request was approved, then your card issuer will confirm your new credit limit. If it was denied, you'll typically need to wait at least three to six months before you try again.
Keep in mind that most credit card companies will automatically increase your credit limit if you're a responsible cardholder. How often this happens depends on the card issuer and your credit card activity. If you're in no hurry, you could wait until the card issuer automatically gives you a higher limit.
Another option, if you need more credit right away, would be to apply for a new credit account. You could look specifically for high-limit credit cards where you're more likely to be approved for a large credit line.
The credit card issuer determines your credit limit based on several factors, including your:
As you'd expect, good credit, high income, and low expenses are all factors that can help you get a higher limit.
If you're requesting a credit limit increase, then the card issuer will also look at your account history with it. That includes:
Each credit card company has its own method to calculate credit limits. Since these methods are private, there's no way of knowing exactly how much a credit card company will offer until you apply for a card.
The average credit card limit is $31,015 as of 2019. It varies significantly by generation, though. Generation Z has the lowest average credit limit at $8,062. The average goes up until peaking with baby boomers, who have an average credit limit of $39,919.
Requesting a credit increase can impact your credit score, but only if the card issuer pulls your credit file. If the request could affect your credit, the card issuer will let you know, whether you're making the request over the phone or online.
When a credit card company pulls your credit file, it's known as a hard credit inquiry. This generally causes a small drop in your credit score. For most consumers, one hard inquiry takes fewer than five points off their FICO® Score, the most widely used type of credit score.
Not every card issuer pulls your credit report when you ask for a credit card limit increase. If yours doesn't, then your request won't have any impact on your credit.
A higher credit limit has its perks, but there are also potential downsides.
More buying power: With a higher credit limit, you can use your card more without the risk of maxing it out. There are several situations when this can be helpful:
Can boost your credit score: You could increase your credit score by increasing your credit limit. One of the biggest factors in your credit score is your credit utilization ratio, or how close you are to your credit limits. A lower credit utilization benefits your credit score. The sweet spot is anywhere at or below 20%. (As in: You've only used up 20% of your credit limit.)
Let's say you have a credit card with a $500 balance and a $1,000 limit. You're using half of your available credit, so your credit utilization ratio would be 50% -- which would likely ding your credit score. You ask to increase your credit limit, and the card issuer raises it to $2,000. Now, you still have a balance of $500, but your limit is higher -- so your credit utilization rate is down to 25%. That's not quite perfect, but it's much better than 50%, and your credit score would benefit.
Greater risk of credit card debt: A higher credit limit is more money you could spend. If you're not careful, it's easy to overdo it and end up with credit card debt. This is more likely if you've had trouble with overspending or you've often found yourself coming close to your credit limit in the past.
The best way to avoid this is by making a budget and tracking your spending. You should also aim to pay off your full credit card bill every month. When you never carry a balance, you won't end up with credit card debt or interest charges.
Can affect future credit card applications: When you apply for a credit card, the card issuer looks at the current cards on your credit file and their respective credit limits. A card issuer may not want to approve you for a card if it determines that you already have a large amount of available credit. Therefore, it's possible a credit limit increase could lower your chances of approval on future applications. However, this all depends on how many credit cards you already have and your credit lines with them.
May ding your credit score: As mentioned above, some card issuers pull your credit file when you request a credit limit increase. This hard credit inquiry can cause a small, temporary credit score drop. It's not a big problem, as it will likely only lower your score by a few points. Still, it's a minor drawback you should know about.
Credit limit increases often happen automatically if you're a responsible cardholder. But you can also request them yourself if you'd like a higher credit limit. It's a simple process, and you could get your credit line increase in just minutes. If it doesn't work out and you're denied, you always have the option of browsing the best credit cards and opening a new one to get more credit that way.
Call your card issuer at the number on the back of your card to request a credit limit increase. You'll need to provide your current income and possibly your monthly housing payment. Some card issuers also allow you to request a higher credit limit online. If yours offers this option, then you can log in, go to the appropriate page, and fill out the required information.
After you request a credit limit increase, the card issuer will decide whether to approve or deny it. If the increase is approved, you'll receive a notification with your new credit limit. If not, you'll need to wait and try again later.
A credit card company will look at several items, including your credit history, income, and expenses, to determine a credit limit when approving you for a card. Each card issuer has its own private methods of setting credit limits for cardholders.
A credit increase request can impact your credit score a small amount if the card issuer pulls your credit file. Some card issuers do this for credit increase requests, and others don't. When a card issuer pulls your credit file, that's considered a hard credit inquiry. Each hard credit inquiry can lower your credit score, but usually only by a few points.
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