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Monitoring your credit score — a number that influences a lot of major life decisions involving money — is a key part of managing your finances.
And while keeping a healthy score is a continuous process that never really stops, there’s something you can do now to boost your credit score quickly: Ask for a higher credit limit on your credit card. This may be trickier now, with credit markets tightening due to recession caused by the coronavirus pandemic, but it could still be worth a try.
“The whole point of this increase is to raise your credit score and put you in a better position to get lower interest rates on mortgage, car loans, and personal loans,” says Farnoosh Torabi, NextAdvisor contributing editor and host of “So Money” podcast. “It’s not to get you further into high-interest credit card debt.”
Increasing your credit limit is free. It raises your debt-to-credit ratio, also known as your credit utilization ratio, so you could see a bump in your score pretty fast — within the next one to two billing cycles, Torabi says.
If you think it’s the right time to raise your limit, there are several ways to ask. You can wait for automatic increases, which issuers often grant if you simply use your card responsibly. Or you could also consider applying for a new credit card, which would reduce your credit utilization ratio — if you do not carry a balance on it and feel you can manage the additional credit responsibly.
How to Increase Your Credit Limit
Requesting a credit limit increase is straightforward, but sometimes it can involve a little bit of legwork, depending on your credit card company. There are different ways you can increase your credit limit and raise your credit score in the process. Here are your options:
Request a Credit Limit Increase Online
Nowadays, you can usually request a credit line increase online. Once you sign in to your account, look for an option to submit a request. You may be prompted to provide some additional personal information, such as income, rent or mortgage payments, or existing debt. Unless there’s an online chat feature, requesting an increase online means you won’t be able to ask any questions.
Before you request a credit limit increase, ask your credit card issuer if a credit check is required, and whether it’s a hard or a soft pull.
Call Your Credit Card issuer
There’s typically a customer service phone number on the back of your credit card. Once you get on the phone with a representative, ask whether it’s possible to get a higher credit limit. The representative may ask you a few questions, such as why you want an increase or whether your income has recently increased. It’s important to be honest about the reason behind your request.
“When you get on the phone with customer service, mention that you’d like to increase your credit limit, not because you’re in any sort of dire situation. You want to prove to them that you’re going to be good for the money,” Torabi says.
Wait For Automatic Increases
If you’ve had a credit card for a while and demonstrate you’re responsible with it, your bank may increase your credit limit automatically, without you having to ask. You can increase your odds of getting an automatic increase by making on-time payments and using your credit card frequently. But you shouldn’t carry a large balance month to month. Basically, if you get an automatic increase, your card issuer thinks you’re responsible enough to handle more credit.
“Staying in good standing with your credit card issuer(s) is always a great strategy. It’s good for your credit, it’s good for your wallet, and it’s going to work in your favor when you want to ask your issuer for things like credit limit increases,” says Michelle Black, a credit card expert and personal finance writer. “They’re going to look back at your account history and see how you’ve managed the credit limit you have now.”
Apply For a New Card
If you don’t want to request a credit limit increase, applying for a new credit card is an option, as long as your payment history and credit score are good. The limit on the new card may not be very high, but it still increases your overall available credit. Beware that applying for new credit usually results in a hard inquiry on your credit report, which affects your credit score. So, avoid applying to multiple credit cards at once.
Does Requesting a Credit Limit Hurt Your Credit Score?
Whether an issuer pulls a hard inquiry on your credit before deciding to give you a larger line of credit depends on its tolerance for risk.
That’s why you should call your credit card issuer to see if there will be a hard or soft pull on your credit. Sometimes when you ask for a smaller increase, typically under $2,000, it will only trigger a soft inquiry, which won’t affect your credit score.
“Often, the boost can be issued right away over the phone, no credit check required,” Torabi says.
But even if there is a hard inquiry, the benefits of a higher credit limit usually outweigh the temporary hit to your credit score in the long run.
The Wrong Time to Increase Your Credit Limit
Timing matters when it comes to asking for a credit limit increase, so you should only do it if it’s going to better your overall financial situation. Ask yourself why you want a credit limit increase. If it’s for reasons like coping with an emergency or paying for a vacation, you shouldn’t ask for one. You should instead focus on building an emergency fund, and there may be other ways to deal with an emergency than to use more credit. As for travel, planning and saving for a dream vacation may take some time, but it can be done.
Don’t be discouraged if you’re not ready for a credit limit increase. You can always ask for one later, when the timing is right. Here’s when it doesn’t make sense to ask for a credit limit increase:
You Requested Too Many Lines of Credit
It may be too soon since the last time you applied for new credit or asked to increase your credit limit. Too many requests can signal to lenders that you’re in financial trouble, especially if they happen in a short span.
This can be frustrating if you’re trying to build your credit score, but you don’t want to seem like a risky borrower. The best thing to do is to space out your requests and applications. Black recommends asking for a credit limit increase when you get a raise, so you can responsibly take on more credit.
Your Credit Score Is Low
Your credit score says a lot about your financial habits, so you likely won’t get approved for more credit if it isn’t good. Lenders use your credit score as a decision-making tool to determine your risk as a borrower. So if your score is in bad shape, it’s best to improve it first, wait a few months, and then ask for a credit limit increase.
You’re Planning to Spend
If you’re in a financial bind or looking to spend more money, requesting an increase on your credit limit is dangerous.
“If you actually plan to use this extra credit, and carry a balance month over month, this hack is not for you,” Torabi says.
It would only make it easier for you to fall deeper into debt. So, before taking any action, ask yourself why you want or need more available credit.