Make sure you are approved for a credit limit increase before you apply
There’s a bit of a catch 22 when it comes to asking for a credit card limit increase: A A higher limit can increase your credit score, but asking for a raise can also temporarily hurt your credit score. What if the lender rejects your request? You just hit your credit score for no reason, which can literally be the opposite of what you were trying to do in the first place. Here’s how to make sure you’ll be approved for a limit increase. before you are applying.
Wait, how does increasing my credit limit improve my credit score?
Credit bureaus base 30% of your credit score on your credit utilization rate, which measures the available credit that you not use (the less you use, the better). By requesting a higher credit limit, you can easily increase your score, which, in turn, it is easier to qualify for the loans.
To request a credit limit increase, contact your lender, either online or by phone (using the number on the back of your card). The downside is that the process often involves a thorough investigation of your credit, which can drop your credit by about 5 points, usually for a few months.
How do I know if I will be eligible for a credit limit increase?
Unfortunately, lenders are a bit vague as to whether you will qualify.. However, there are ways to improve your chances of getting a limit increase:
- Your income or credit rating has recently increased: If you’re making more money or have better credit than when you first applied for the card, that’s often all you need to get a raise.
- Know your financial situation (and be specific): Your lender may want to know information such as your total annual income, employment status, and your monthly mortgage or rent payment. In some cases, they will verify this before approving the increase, so make sure the information you provide is correct.
- Don’t be greedy: A The general rule is to ask for a 10-25% increase in your credit limit.
- You paid your monthly balance on time: You’ll need at least a few months of regular repayments to look like a trustworthy borrower.
- Apply when your credit usage is already low: YesWe don’t want to seem desperate to have more debt than you already have, so try to keep your debt usage below 30% when you apply.
- Plan your request strategically: A a serious investigation will only damage your credit score for a few months, but it could still hurt your possibility of qualifying for loans at favorable interest rates. Therefore, consider postponing an increase in your credit limit if you plan to finance a large purchase, such as a house or a car. Also, don’t apply for many loans and credit cards at once, as this can be a red flag for lenders.
You can also question if there is a difficult question with your request — sSome requests only require a smooth investigation into your credit, which means they won’t hurt your credit score at all.