When you have credit available to you, it means you can spend more, but that’s not necessarily a true benefit of requesting a credit limit raise. Raising your credit limit on your current cards can actually boost your credit score and comes with other advantages as well.
Of course, requesting a higher credit limit can potentially have pitfalls, so the following are the things you should know before you ask your credit card company to give you more spending power.
How Do You Raise Your Credit Limit?
Some card companies do it automatically after a period of time. Other times, you have to contact the company directly and request it.
You may be able to request a credit limit increase online, and that typically requires that you also update your income information. You can also call your card issuer. Sometimes, you can apply for a new card with the same company if you have a history of on-time payments.
What Are the Benefits of a Higher Credit Limit?
When you’re responsible with your credit cards, and you have a higher limit, it can increase your credit score. That’s because it keeps your utilization low.
Credit utilization is a measure of how much of your available credit is being used, and it’s one of the biggest factors in your credit score.
If you keep your utilization low, it signifies to creditors that you’re living within your means, and high utilization can show the opposite. If you’re maxing out your credit cards, it may indicate you’re experiencing some kind of financial distress as well.
Even if you pay off your balances, if you use most or all available credit every month, it’s going to be hard to get your credit score where you might want it to be.
You should try to keep your credit utilization at no more than 30% of your limit on each card and also overall.
If your credit score is higher because you have more credit available and you’re using a minimal amount of what you have at your disposal, it’s going to make it easier to get loans and other types of credit. You might also get lower interest rates.
It can also help you in an emergency if you have a credit limit that’s above what you would typically need to spend.
Having that credit available to you, even though you might hope you never need it, can give you peace of mind.
If you have a higher credit limit and the card has rewards, it can also be beneficial to put your expenses on it and then pay it off every month without carrying a balance. You can maximize your rewards.
Another upside of a higher credit limit is that if you need to make a big purchase at some point, you can do so more efficiently without having to use multiple cards.
What About the Risks of a Higher Credit Limit?
Having a lot of credit available to you isn’t the right option for everyone.
First, if you ask for a credit limit increase, your card issuer might pull your credit. Credit inquiries can lower your score. Card issuers don’t always do that, but before you ask for a limit increase, you might want to confirm.
You also run the risk of getting yourself into too much debt.
If you’re not organized with your payments, and you don’t have self-control, you should really think twice before you request a credit limit increase.
Before you request an increase, think about sitting down and going over your monthly budget. You never want to spend more than you can pay each month, and if you think you could be at risk for doing that, you might want to leave your credit card limits where they are.
Along with the risk of taking on more debt in general, you might also pay more in interest.
If you’re weighing whether or not to request a limit increase, wait until you have a reason to do so. This reason might be a pay raise, for example, or perhaps you’ve had the card for several years, and you’ve managed it responsibly, so you feel confident in yourself.
If you are smart with your credit cards, raising your limit can be a good thing and can be that boost to your credit score that you need to qualify for something like a home loan, for example.