When to ask for a credit limit increase?
If you are thinking about increasing your credit limit, when should you ask your card provider? Or is it better to leave your limit as it is?
A credit limit is the maximum amount you can spend with your credit card. It’s determined by your credit score and how much your card provider thinks you can afford to borrow. However, things do pop up in life that mean you might need some extra cash, such as increased work expenses or car repairs.
There are some practicalities when asking for a credit limit increase and some things you should think about before you apply. Let’s talk about the practicalities first.
When to request a credit limit increase
So when is a good time to ask for a raise?
Most card providers ask you to wait a certain amount of time (three to six months) after receiving your card before requesting a credit limit increase. This is largely due to the fact that they have already assessed your personal financial situation and decided what to lend you, and probably nothing has changed since that initial judgment.
However, once you have your card for a while and have stayed within your current credit limit and have made your minimum monthly payments, the card provider can see a personal credit history for you and can therefore be more likely to lend you more money. .
There are also restrictions on when you can apply for a credit limit increase if you have already had one. Most providers will ask you to wait a while before you can request another raise, even if your first request was successful.
3 things to consider before asking for a credit limit increase
1. Did you stay within your current credit limit and make your minimum monthly payments?
These factors will be essential in the provider’s decision-making process as to whether to lend you more money.
2. Has your financial situation changed?
You will be asked to provide details of your income and expenses, so if they remain unchanged from when you originally withdrawn your card, there may be no movement to your credit limit. Likewise, if you’ve taken out a loan or mortgage, it could affect how much a card provider is willing to lend you based on your overall debt commitments.
3. Does your card provider automatically increase your limit?
Some providers automatically increase your limit if you’ve managed your credit account well over a period of time. If there is no rush to have additional funds, consider whether you could wait until your limit is automatically increased and thus avoid the risk of your request for a credit limit increase being rejected.
Is there a risk ?
Before contacting your provider about a credit limit increase, you should take a moment to determine if you really need it and what impact it might have on your finances.
Any increase in the level of debt you owe could have a negative impact on your credit score. Rating agencies take into account the overall amount you have borrowed. Therefore, if you have a large credit limit on an existing credit card, it could hurt you when applying for other cards or other financial products such as loans and mortgages. Any request you make to increase your credit limit could leave a mark on your credit report, especially if your request is denied.
Also consider that increasing your credit limit could cause you to overspend and thus lead to a level of debt that you are uncomfortable with. If you are going to apply for a credit limit increase, think about what you can afford and try not to borrow beyond your means.
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