It is tempting to just give a call to your credit card company and request that they increase your limit especially if they are open to this. Such a move will have an impact on your credit score, and it is important to know how this will happen. The most prudent idea is to dig deeper into this subject. As surprising as it is, most credit card companies are willing to raise the limit especially if you have been using the credit card responsibly. Before you make this move, read the highlights below.
Understand Why You Want the Increase
It is unusual to just wake up and decide that you want a credit card limit increase. Such a decision is triggered by something in your life. Assess if it is indeed necessary to raise this limit. If you have been using the current credit card well within the recommended utilization ratio, you can avoid making any alterations.
You can only increase the limit if the balance is being repaid on time. An increased limit will lower the utilization to a safer level, which will in return boost your credit score. If this is the intended plan, then your decision to increase it is worth the effort.
Your Increase Request Is Likely to Be Approved
When you want to increase the limit, all that you need to do is contact your credit card issuer. In many cases, they approve such requests within a short time. One study found that over 80% of such requests were approved in America.
Although they screen your payment history and utilization ratio, many people are within the recommended ranges. Again, the issuer will not have a problem if you prove a stable source of income.
It Affects Your Credit Score
An increase in a credit card limit has an effect on your credit score in many ways. It could be positive or negative. Currently, the reporting agencies look at your repayment history and credit utilization ratio as some of the considerations for awarding points. But according to the boost credit website, the higher credit limit may tempt you to spend more. In return, you may strain to repay or improve the utilization ratio. Taking all of this into consideration is a great guide for making the right decision.
Your Current Credit Score Will Probably Be Used
Even though the issuer may not have a problem raising this limit, they will most likely review your current credit history and score. It is easy for them because they work closely with the credit bureaus. Their interest is in learning whether or not you have additional credit cards with other issuers and can handle a higher credit card limit.
The above pointers are very essential before making a request to increase your credit card limit. If you are convinced that it is necessary, taking these steps will have a benefit. But for those who are already straining financially while repaying a debt under a lower credit card limit, then the move is not good. Assess the situation carefully and make the right decision.