Raise Your Credit Limit – Yes or No?
There’s a lot you should know about requesting an increase to your credit limit. It’s a request that can have some serious consequences if you’re not strategic about it, and it’s something that you should really plan for before asking your credit card company.
Before jumping in and asking for an increase, it’s important to determine your exact goals with a credit limit increase, whether your financial position will allow you to be approved for one and just what are the risks involved in an increase.
Know The Risks
Before requesting an increase, be aware of your financial position. The decision is based on your ability to repay the loan, so you’ll want to make sure you’re actually in a good enough position at the time of your request to increase your chances of approval. Determine how much of an increase you’re looking for, and let your lender know if you’ve recently gotten a raise or started a higher-paying job.
It’s also vitally important to explain to your lender why exactly you’re requesting an increase. What is it you’re looking to do with it? Are you hoping to spend it on something or just looking for a security buffer or emergency funds? Be prepared before you make the request with all of the information you need to back it up.
And don’t just go making requests without taking it seriously, because credit limit increase inquiries often result in a hard pull of your credit score. Hard pulls can potentially affect your credit score significantly. That’s why it’s so important to be sure you’re in a position to be improved. Make sure your credit score is good at the time, as you won’t be approved if you don’t have a healthy credit history and a good track record.
The Great Benefits
Yes, there are risks involved with requesting a credit limit increase — just as there are risks involved in applying for a credit card to begin with. If you are considering inquiring about an increase, though, you should know that there are some really great benefits attached to going this route if you’re smart about it and decide it’s right for you.
One of the most convenient benefits of a credit limit increase is that it lowers your utilization and improves your score. If you’ve got $1,000 in credit and use $800 — then increase your limit to $2,000 — the percentage of utilization will decrease, which can improve your score greatly.
Another potential benefit to an increased credit limit is that it doesn’t create any dings on your score like opening another card would. Think about it this way — the longer you’ve got an account open, the better your score is. A credit line increase would allow for more credit to be used while remaining established with your lender and positively affecting your credit score.
Always acknowledge your habits before requesting an increase, as it’s not always the right option for everyone. If you know deep down that you’ll always spend up to your limit regardless of how high it is, this might not be the way to go. But if you can be financially safe and smart with your finances, a credit limit increase just might be the route for you.