When to request a credit limit increase
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Asking for a credit limit increase may be necessary when times are tough and your credit limit doesn’t match your increased spending habits. Many Americans face financial hardship as a result of the ongoing coronavirus pandemic, and asking for a credit limit increase can help ease the burden of shopping for groceries and other essentials.
But before you ask your card issuer to increase your credit limit, you need to determine what effect a higher credit limit might have on your credit score, and whether an increase will really improve your financial situation or just do it. harm her.
Below, CNBC Select examines when you should request a credit limit increase, how a credit limit increase affects your credit score, and ways to request a credit limit increase.
When is the best time to request a credit limit increase?
When your credit card application is approved, your card issuer will assign you a credit limit. This amount can range from a few hundred dollars to tens of thousands of dollars. As the length of time the card is used increases, your credit limit will usually increase as well. These increases may occur automatically, at the request of your card issuer.
But there are cases, such as the coronavirus pandemic, that may cause you to ask for a credit limit increase earlier than waiting for an automatic notice.
However, you should only ask for a credit limit increase if you are sure you are not overspending. Any purchases made on your card that are not paid by the due date will result in the normal APR, unless you take advantage of a 0% APR period. (Find out how 0% APR credit cards work.)
Here are some of the best times to apply for a credit limit increase:
- When you have good credit: If you have good credit (scores 670 to 739) or excellent credit (scores 740 and above), it means you manage your credit responsibly. This signals your card issuer that you can probably handle a higher credit limit.
- When you get a raise: If you’ve recently gotten a raise, this may be a great time to update the income shown on your credit card account, which can cause your line of credit to increase automatically in a matter of months. You can also request a credit limit increase and enter your new income. This shows the lender that you have the capacity to pay more expenses.
- When your consumption habits change: Major events, such as a wedding, buying a house or starting a family, can drastically change your spending habits. You could incur more expenses for groceries for your family or buying furniture for your home that requires a higher credit limit.
When is the worst time to ask for a credit limit increase?
While you can jump at the chance to ask for an increase in your credit limit if you’re strapped for cash, it may be wiser not to. Credit limit increases are not without risk. You might see an impact in your score if your card issuer pulls your credit report to check whether or not to approve a credit limit increase.
To play it safe, here are some of the worst times to ask for a credit limit increase:
- When you have bad credit: If your credit is bad (scores below 580), there is a low chance that you will be approved for an increased credit limit. And if you ask for a credit limit increase that causes your credit to drop sharply, it can further affect your score. A better option is to build up your credit and apply for a raise when you have a good credit rating.
- When your income has decreased: A recent layoff, demotion, or job change that resulted in a drop in income can hurt your chances of getting your credit limit increased.
- When you have used up your card: If you’re already nearing your current credit limit and keeping a month-to-month balance, you’re not in the best position to ask for more money. Consider paying off your debts first.
- When you’ve just opened the card or requested an increase in your credit limit: Many card issuers require you to wait at least three months after opening the account before requesting a credit limit increase. And you may have to wait six months between requests for a credit limit increase, as with Citi cards, like the Citi® Double Cash Card.
How to request a credit limit increase
Credit limit increases can happen automatically without any action on your part or at your request. Automatic credit limit increases may occur each year or if your card issuer notices that you have recently updated your income.
If you want to request an increase in your credit limit, you can usually do so in one of two ways: online or over the phone. Online requests can be made through your card issuer’s mobile app or by logging into your online account. For example, if you have the Chase Sapphire Preferred® card, the Chase website states that you can “log in to get an instant decision on your request for a line of credit increase.”
You can also call your card issuer to discuss an increase and explain why. This can be a good idea if you don’t have increased income but want to explain your need for more credit and make sure you can pay it off.
When the time comes to increase your credit limit, make sure you have the following on hand:
- Annual revenue
- Employment status
- Monthly housing payments (rent or mortgage)
- In some cases, you can also provide a new suggested credit limit
In most cases, you can expect to receive an instant decision on whether to approve or deny a higher credit limit increase. If your credit limit is approved, make sure you don’t abuse the increased purchasing power. Continue to make payments on time and in full.
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