When you apply for a credit card, a lender makes two decisions: whether to approve you for an account and what your credit limit will be. The credit limit is the maximum amount you can spend on that card.
Credit limits can start as low as a couple of hundred dollars for a brand new borrower, especially if it’s a starter product (like a student card or a secured card). Over time, consumers can gain access to credit limits well above $10,000 if they become established credit users with high credit scores. But that doesn’t happen overnight.
In general, your access to credit, or how high of a limit a card issuer will grant, increases gradually as you show you can manage your credit responsibly. And if your limits don’t increase automatically, you’ve got a good shot if you just ask: A 2018 CreditCards poll found 85 percent of people who asked for a higher credit limit were approved, depending on factors such as income and credit score.
That said, if you think you’re ready to graduate to higher credit limits, here’s what you need to know.
Why would you want a higher credit limit?
A higher credit line gives you some financial cushion if you need to make a big purchase, says credit expert Wayne Sanford, owner of Credit Bureau Investigations.
“Say you have a card with $1,000 limit, but you have to [use] $800 for new tires for your car. In one visit, you will have used 80% of your limit, nearly maxing out that card,” he says.
If you had a higher limit, though, it wouldn’t hurt your credit score as much, Sanford says.
This matters because your credit score is based on a number of factors, with credit utilization ratio being the second most important, making up 30% of your FICO score (the most popular type of credit score). When you have a low credit limit, even if you’re paying your bills on time, it is harder to keep your utilization rate low and, therefore, harder to maintain a good credit score.
Using the above example, if you had a $2,500 limit instead of a $1,000 limit, the $800 tire purchase would result in a more favorable 32% utilization rate for that card, instead of 80%.
Of course, higher credit limits offer other benefits. For instance, you can tap into that extra credit in case of an emergency. Sure, building up emergency savings is a better way to protect yourself, but your credit card account can be up your backup plan in some cases.
Know how your limit grows
Credit limits usually don’t stay the same for long. Here’s how they can increase:
- Automatic increase. Most credit card issuers typically review your account at the six and 12 month marks, Sanford says. If your account is in good standing at that point, you might earn a new credit limit increase with the credit card company.
- Increase request. If you’ve been using your card for some time and you’ve been paying your bill in full, you could ask the card issuer to boost your credit limit. You might be able to do this on the account website or app, or you could call the issuer’s customer service department.
Request a credit limit increase
If you decide to make the request, keep these four things in mind.
- It could affect your credit score
If the credit issuer pulls your credit report as part of the review process, that’s called a “hard inquiry.” Typically, anytime you’re applying for more credit, there is a temporary, minor decrease in your credit score. However, if they approve you and your available credit line increases, that may improve your score, and cancel out the slight drop.
If the card issuer performs a full credit review, you might get an even bigger increase in your line of credit, Sandford says, if you are approved. This is especially true if you have good credit.
- You could avoid a “hard” pull
Card issuers vary regarding the criteria they use for approving a credit limit request. In fact, some don’t do a “hard” pull of your credit at all.
If you’re unsure about your card’s policy on this, just ask, Sanford says.
“You can ask the creditor for a history review increase, for which they won’t pull your credit,” he says. “They will only look at when was the last time you had an increase and your payment history with them.”
On-time payments are key here, but if you constantly come close to maxing out the card, that can penalize you.
- Timing counts
To boost your chances of qualifying for a higher credit limit, consider when to make the request. If you recently opened your account or you received a credit limit increase in the past few months, you probably should hold off on the request for a few more months, Sanford advises. The same goes if a negative mark shows up on your credit history, such as a late payment.
- Know your own limits
Gaining access to a higher credit limit can help – or hurt – your credit, Sanford warns. “It’s incredibly easy to swipe [a card],” he adds, “and most of the people that are in debt say they had no clue it was that bad until it was too late.”
In other words, just because you get higher credit limit doesn’t mean you should go on a wild spending spree and get into credit card debt. In fact, if you aim to improve your credit situation and raise your credit score, high limits with low balances are key.