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There’s no secret formula on how to increase your credit limit. It’s true that banks and issuing companies are the only ones who can decide on this, but that doesn’t mean you can’t influence their decision.
Why Are Credit Limits Important?
People who have a higher credit limit have more spending flexibility. Different credit cards have different limits, and they usually range between hundreds to thousands of dollars. For example, business credit cards often have higher limits compared to basic cashback cards.
Credit limits also have a reciprocating connection to credit scores. The three major credit bureaus, Experian, Equifax, and Transunion, look at people’s credit limits and utilization rates to compute their credit score.
Meanwhile, lending companies also look at applicants’ credit reports or scores, along with other financial factors, to determine the credit limit they should get
The difference between the two is credit scores represent a person’s overall credit history and worthiness, while credit limit is simply the maximum loanable amount a person has. Building up your credit score can take years, but building your credit limits only take months with these five simple steps.
1. Ask For An Increase From Your Issuing Company
If you want to increase your credit limit, just ask your issuing company. Simply call customer service and ask them for a credit limit increase. Some credit card companies even allow cardholders to request an increase through their online accounts.
However, it’s not a hundred percent guarantee that you’ll get an increase because companies will still need to look at your monthly income, spending habits, and credit utilization rate. They will also ask additional questions like the amount of the credit increase you’re looking for and the reason for the request.
If you’re a responsible spender and the reason behind your request is valid enough, you won’t have any problems getting the credit increase.
2. Switch To A Different Credit Card or Company
If your issuing company won’t approve your request for a credit increase on your card, then maybe it’s time to get a new one or switch to a different company. You don’t have to put up with a low credit limit if you’re credit report is good.
A credit card has its limits too, so it’s important to be aware of the limits of your card and your issuing company. For example, there are credit cards for beginners that have low to average credit limits, and then there are top-tier business cards that have really high credit limits.
See Related: The Top 5 Credit Card Companies
3. Increase Your Security Deposit
Secured credit cards are recommended for beginners who want to build a good credit history, and these cards give people a different approach to slowly build their credit limits over time.
A secured credit card’s credit limit depends on the security deposit a user makes upon opening the account. For example, if you make a $500 security deposit, the issuing company will also give you a $500 credit limit.
The larger the amount, the bigger your credit limit will be. The deposited amount will also serve as collateral for unpaid debt but it’s completely refundable. Call your issuing company if you have plans to increase your secured credit card’s credit limit because each company has different procedures.
4. Credit Limit Transfers
If your request for a credit limit increase was denied by your company, don’t worry, because there’s a way to get around it.
If you have two credit cards from the same issuing company, you can request a credit limit transfer between your two cards. Another option is to sign-up for a new card with the same company and then transfer a part of its credit line to your old card.
Let’s say you have two credit cards: a Chase Sapphire Reserve card with a $15,000 credit limit and a Chase Freedom card with a $5,000 credit limit. You can call Chase customer service and have them transfer $5,000 from your first card to your second one.
See Related: Credit Card Application Denial: Next Steps To Take
5. Play The Waiting Game
If you’re too lazy to do the four steps above, you can just wait for your issuing company to automatically increase your credit limit.
All you need to do is to use your card responsibly and you should expect a credit limit increase within a calendar year. Here are some of the few things you can do to increase your chances of receiving a limit increase:
- Always pay your dues on time. This tells your company that you’re a responsible cardholder.
- Use your card for swipe purchases. This generates transaction fees for your bank so they’ll return the favor by giving you a credit limit increase.
Once you get your credit limit increase, make sure you keep your spending habits the same. Keep your credit utilization ratio between 10% – 30%. For example, if you have a credit limit of $10,000, you can use a minimum of $1000 and a maximum amount of $3000.
A higher credit limit doesn’t mean you should maximize your spend because it’s not really your money in the first place. As credit card enthusiasts, the goal should be increasing your credit score so you can get approved for more credit cards.