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Before we get into how to ask for a credit limit increase, let’s review a more basic question: What is a credit limit?
A credit limit is the maximum amount your credit card issuer will allow you to charge on a single credit account. Pretty simple, right? But what actually happens if you meet or exceed that limit?
If you go over your credit limit, your card issuer may simply decline the transaction. Some card issuers may allow charges that exceed your credit limit, but they typically charge an over-limit fee of up to $25 the first time you go over your limit and up to $35 if you do it again within six months. Heads up: A card issuer can’t charge an over-limit fee unless you’ve agreed to permit over-limit charges on your card.
Spending more than your credit limit may come with other consequences, as well. Your card issuer may decrease your credit limit if you’re a repeat offender, and your required payment may increase because you’ll have to pay the amount you spend over your limit in addition to your minimum payment.
The good news? Your credit limit can also swing the other way. In some instances, if you’re a responsible spender and routinely pay off your balance on time, the card issuer might automatically raise your credit limit even if you didn’t ask for an increase.
But card issuers don’t always automatically increase your credit limit. If you want a credit limit increase, most of the time you must be proactive. This means calling your card issuer and explaining why you deserve an increase to your credit limit.
Sound intimidating? Don’t worry. We’ve put together a step-by-step guide for how to ask for a credit limit increase. Check it out below.
How to ask for a credit limit increase
- Ask yourself why you want a credit limit increase
- Know your credit history
- Gather the documents you’ll need when you ask for a credit limit increase
- Make your case
If you’re thinking about asking for a credit limit increase on your credit card, the first step is to assess your current financial situation. Consider the pros and cons of a credit limit increase.
On the plus side, a higher credit limit may lower your credit utilization rate if you keep your balance under control, says Bruce McClary, vice president of public relations and communications at the National Foundation for Credit Counseling.
Credit utilization is the amount of available credit you’re using out of your overall credit limits. It’s one of the factors that make up your credit scores. Most experts recommend keeping your overall credit utilization below 30 percent. Lower credit utilization rates suggest to creditors that you can use credit responsibly without relying too heavily on it.
You can figure out your credit utilization rate by dividing your total credit card balances by your total credit card limits. Having a higher credit limit on one or several card accounts can help keep your utilization rate below 30 percent.Learn more about credit card utilization and your credit scores
Then again, a higher credit limit could also lead to trouble. “A higher limit may lead some to feel that there is that much more room to spend,” warns McClary. “Too much of a good thing can be bad, especially if you start opening more accounts with high credit limits.”
As is usually the case, it’s best to spend responsibly and within your means. Just because a higher credit limit may allow you to charge an expensive electronic device or pay for a vacation doesn’t mean that asking for a higher limit is the right option for you.
“It’s not a good idea to request a credit limit increase for an impulse purchase, especially if the item is not a necessity,” says McClary. Card issuers may also view applying for a mortgage or auto loan right before requesting a credit limit increase as an indication of a high-risk customer, he notes, because it could indicate that you’re about to take on a large amount of debt.
This is one step we can definitely help with. Get your free VantageScore credit scores and reports from two major credit bureaus at Credit Karma to help figure out your next move. And don’t worry — checking your credit scores on Credit Karma is a soft inquiry, which will never affect your credit.
Heads up, though: When you request a credit limit increase from your credit card company, they may perform a hard inquiry to determine your eligibility. This can affect your credit scores. A hard inquiry from a credit limit increase request is a normal part of the process of applying for new or additional credit, says John Ganotis, CEO of Credit Card Insider.
A hard inquiry remains on your credit reports for approximately two years and may impact your credit scores for one year or more depending on the scoring model used. “The impact can vary widely depending on the rest of your credit,” says Ganotis. “For example, if you don’t have very much credit history established, a hard inquiry may impact you more.”
For example, one hard inquiry may not affect your credit scores at all or it may decrease your scores by less than five points. On the other hand, if you have only a few accounts or a short credit history, hard inquiries can have a greater impact on your scores. That’s why you should know your credit history before you ask for a credit limit, especially if you’re expecting additional hard inquiries from any other credit requests.Learn more about hard and soft credit inquiries
So, how much will asking for a credit limit increase hurt my credit scores?
One hard inquiry resulting from your credit limit increase request will typically only result in a minor dip in your credit scores, says Ganotis. There are many different types of scoring models, so a person doesn’t have just one credit score. “Credit scoring models are proprietary, so it’s impossible to know exactly how many points a credit score will change as a result of a hard inquiry,” says Ganotis.
Your card issuer may want to know your current annual income, employment status and how much you pay for housing each month. Have that information ready to go before you call.
That’s right, we said call. You can sometimes ask for a credit limit increase by applying on your card issuer’s website, but you’ll have a better opportunity to ferret out information if you speak to a representative on the phone.
“If you request an increase over the phone, you’ll be able to talk to the representative and ask questions or see if there’s an amount of additional credit you could get without a hard inquiry, so that may be better in certain situations,” says Ganotis.
When asking for a credit increase, it’s a good idea to stick to the basics, says McClary. Keep the request simple and straightforward.
Here are some tips for how to go about it:
- Have your talking points prepared beforehand, such as why you want the increase and how much of an increase you’d like.
- Make a list of questions you want answered before committing to the request. For example, will you be able to ask for another credit limit increase later if you want one? Will this request result in a hard inquiry on your credit reports?
- Be polite and explain why you are asking for a credit limit increase. Don’t lose your cool if things aren’t going your way or if the representative has an attitude. Instead, consider getting off the call and trying again later with a different agent.
- If you don’t succeed, ask why. You’ll want to know the exact reason the increase was denied so you can work on creating a situation where you’re more likely to be approved. If you’re juggling too many high balances, for example, create a plan to pay them down. Once you’re in a better position, you can try again.
Most of the factors that will determine success are determined before the conversation begins, says McClary. “What you say may not increase the likelihood of approval if you are working against a low credit score or a poor payment history with that creditor.” Still, saying the right things certainly won’t hurt your case.
If you get a credit limit increase, you may improve your credit scores by lowering your credit card utilization rate and keeping the balance low. At the same time, having more credit available could be so tempting that you end up with more credit card debt than you can comfortably pay off. If you’re careful to not take on more than you can handle, a higher limit allows you to make large purchases more efficiently, possibly racking up more rewards points along the way.
Before you ask for a credit limit increase on your credit card, first assess your current financial situation. Be honest with yourself about why you want a higher credit limit. Then, if you still think a credit limit increase is in your best interest, contact your card issuer and make your case.
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