Why Now May Be a Good Time to Apply for a Credit Limit Increase
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Credit card issuers are now relaxing their stringent lending requirements that were put in place a year ago when the pandemic hit. With millions of people out of work, issuers faced a conundrum: Would consumers start relying on credit cards to pay for basic expenses?
But the improving economic climate, coupled with a surprising record drop in credit card balances, means that issuers are now in a hurry to sign new customers. A new report from TransUnion has found credit card issuances are on the rise again and the Wall Street Journal reports that card issuers have spent more on marketing this year than last year and are sending out more card solicitations credit. Banks like Capital One are increasing credit limits for cardholders.
If your credit card limit was lowered in the past year, or if you wanted to request an increase in your credit limit, maybe now is the time to do it. Your chances of getting additional credit approved are even better if you a) have at least a good credit score (661-780) or b) have a higher income than when you applied for the credit card.
Things to consider when requesting a credit limit increase
A higher credit limit provides the opportunity to spend beyond your means, so it’s important that you make sure you can stay on budget if your purchasing power increases. Asking for a higher limit could also lead to a difficult investigation if your card issuer withdraws your credit report in the approval process, which can temporarily drop your credit score around five points.
The good news, however, is that once you get a higher credit limit, it’s easier to maintain a low credit utilization rate because a high limit increases your overall available credit. In turn, this can improve your credit score.
Your usage rate is calculated by dividing the total of your outstanding balances on all of your cards by your total credit limit. You then multiply that number by 100 to get a percentage. So the higher your credit limit and the lower your card balance, the lower (and better) your usage rate will be.
Has your request for a credit limit increase been refused?
You can usually expect a quick response from your bank on whether your request for a credit limit increase is approved or denied.
If you are denied a higher credit limit, we recommend that you wait six months before trying again. You can use this time to try and increase your income through a side business or work to improve your credit score by paying your monthly bills on time.
Be sure to sign up for the free Experian Boost ™ service, which allows you to get credit for your on-time bill payments for things like your cell phone, internet, cable, utilities (gas, electricity, water ) and streaming payments like Netflix ®, HBO ™, Hulu ™ and Disney + ™.
Experian Boost ™
On the secure Experian site
Increase in average credit score
10+ points, although results vary
Affected credit report
Credit rating model used
High limit credit cards – and more – to consider
Credit card issuers usually don’t advertise their credit limits, but some will include a minimum credit limit in their prices and terms. Visa Signature® or Visa Infinite® branded cards generally offer a starting credit limit of $ 5,000 or $ 10,000, respectively, which we consider to be a high limit.
Two popular cards in these categories are the Chase Sapphire Preferred® Card (a Visa Signature card) and the Chase Sapphire Reserve® (a Visa Infinite card, one level above Signature). Although Chase does not post credit limits on their site, travel credit cards usually have higher limits.
You won’t know your credit limit until your application is approved, and a lot takes a toll on your credit score and income.
For those who don’t have the good or the excellent credit to qualify for one of the Sapphire cards or other travel card, consider a product like the Capital One® QuicksilverOne® Cash Rewards credit card. While cardholders don’t immediately have a high credit limit, they do have the flexibility to increase their limit over time. Capital One automatically considers you for a higher credit limit after six months of on-time payments, and a member of the myFICO® forums said cardholders can receive a $ 100 increase after their second or third billing statement.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.