Your credit limit is the maximum amount of credit given to you by a lender. In this article, we’ll cover why credit limits are important, 4 ways to get a spending limit increase on your existing credit card, and when you probably shouldn’t ask for an increase. (Hint: If you’re currently paying off debt—i.e., with a payoff method like the debt snowball—you may want to wait.)
Why your credit limit is important
The amount of credit you’re currently using compared to your overall credit limit is known as your credit utilization ratio. Your credit utilization ratio is a big factor in your FICO score, accounting for 30% of it.
Using too much of your overall limit indicates to lenders that you’re overextending yourself financially and are at risk for defaulting. Therefore, a high credit utilization ratio will hurt your credit score. But if you get a higher credit limit, it should lower your credit utilization ratio since you’d be using less of your total credit limit—which can improve your credit score.
When you shouldn’t ask for an increase
Here are a few things to know prior to asking for an increase:
- Don’t request an increase if you’re in debt: If you’re already in debt or if you don’t have good financial habits in place, you shouldn’t request a credit increase. Make sure you’re already making your payments on time and in-full before becoming responsible for more credit.
- Don’t request an increase if your account is brand new: As a rule of thumb, you’ll want to wait until your account is at least 6 months old before asking for an increase.
- Don’t request an increase if you’ve requested credit elsewhere: Numerous new credit requests can be a sign that you’re in spending trouble. Applying for several new cards or new increases can hurt your credit and prevent you from being approved.
4 ways to get a spending limit increase
1. Wait for an automatic increase
Some issuers have periodic account reviews that include automatic credit limit raises for borrowers who meet certain criteria.
2. Request an increase online
Some issuers allow you to request an increase online. Simply sign in to your account and submit a request.
3. Request an increase by phone
Some issuers will only raise your limit by phone request. Call the number on the back of your card and listen for the appropriate prompt.
4. Add to your deposit
If you want a limit increase and have a secured credit card, you can increase your credit limit by putting more money toward your deposit.
Why asking for an increase can ding your credit score
When you request an increase, the issuer often places a hard inquiry, or hard pull, on your credit report. While this can temporarily lower your credit score, the pros of a higher credit limit will ultimately counteract the short-term damages.
A credit limit increase can help your credit score assuming you:
- Aren’t in debt
- Have had the account for more than 6 months
- Haven’t recently requested other cards or limit increases
As Peter Parker’s Uncle Ben famously said, “With great power comes great responsibility.” Go forth and use your new increase wisely.
By Stefanie Gordon
Stefanie Gordon is a content strategist with over a decade of professional writing experience. She is a former financial journalist who has spent the last several years working in digital marketing. She specializes in content strategy and creation for large and small businesses in finance and technology.