How to increase your credit limit
If your needs have changed, you might consider increasing your credit card credit limit. But be sure to consider the pros and cons first.
Your credit limit is the maximum amount you can spend with your credit card. It’s set when you’re approved for a credit card, based on the information you provide and the minimum and maximum credit limits for the specific card.
You can request at any time to change your credit limit. If you need more credit, you can request an increase. If you need less, you can request a decrease.
How to increase your credit limit?
You can usually request a credit limit increase through online banking, over the phone, or at a branch, depending on your credit card provider.
Your provider will usually ask you to provide information about your current financial situation to ensure that the new credit limit meets your needs. This may include information about your income, assets, expenses, and debts, such as other credit cards or loans. Your supplier may also perform a credit check on you.
What are the benefits of increasing your credit limit?
The main benefit of increasing your credit limit is that you will be able to access more funds. This could be used to pay for large upcoming purchases or could provide an extra safety net in an emergency. That being said, you should first consider whether you could pay for the expenses in another way, such as creating an emergency fund.
What are the disadvantages of increasing your credit limit?
Increasing your credit limit may affect your ability to obtain credit in the future. This is because banks and other credit providers look at your credit report when they decide to grant you credit and how much. According to CommBank, “a higher limit means they may offer you less than you expected or even reject your application altogether.”
By increasing your credit limit, you also risk spending more on unnecessary purchases, which could lead to debt. So it may not be wise to increase your credit limit if you currently have a balance on your card from month to month.
Is increasing your credit limit hurting your credit score?
Your credit limit impacts your credit score. According to credit reporting agency Equifax, a smaller credit card limit may carry a different level of risk than a larger one.
Also, if you request an increase in your credit limit, your provider may perform a credit check and it will appear on your credit report as a credit inquiry. If you make several credit applications in a short period of time, it can hurt your credit score.
So before increasing your credit limit, you might want to check your credit score. If your score is not as high as you would like, consider taking steps to improve it.
Your credit limit is just one factor that can affect your credit score. Other factors like the type of credit grantors you applied for credit from, the type of credit you applied for, the number of applications you made, and your repayment history can also impact your score.
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