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Increasing your credit limit can bring about two immediate benefits: It can increase your credit score by lowering your credit utilization, and it gives you more purchasing power before maxing out your card. Getting a credit limit increase means your card issuer thought you were worth trusting with more borrowing power.
It’s generally helpful to have higher credit limits, unless you’re worried about overspending. Sometimes issuers will automatically grant credit limit increases, but you can usually request them, as well. Here’s how and why it usually makes sense to ask for higher credit limits, and how that strategy compares to opening a new credit card.
Key Takeaways
- Increasing your credit card limit can lower your credit utilization ratio, which can boost your credit score.
- It also gives you more purchasing power before maxing out the card.
- In some situations, a credit limit increase can be more appropriate than a new credit card.
- Before requesting a credit limit increase, it’s worth reviewing your credit with a free or inexpensive credit monitoring service.
- If you get an increase, commit to using the expanded credit limit responsibly and not overspending.
Increase Your Credit Score
Increasing your credit card limit can boost your credit score by reducing your overall credit utilization, as long as you don’t start spending more as a result. Here’s how.
Your credit utilization ratio is an important factor in the calculation of your credit score (“amounts owed” is 30% of a FICO score). Credit utilization refers to the amount of credit card debt you have compared to your total available credit—the more debt you have compared to your total credit limit, the higher your utilization, and the worse it is for your credit. The lower your credit utilization, the better it is for your credit.
For example, say you have two credit cards with $1,000 credit limits each, and a $500 balance on one card. Your total available credit is $2,000, and your credit utilization ratio is 25% ($500 is 25% of $2,000).
Now, what if you increase one of those credit limits to $1,500 and keep the same $500 balance? Your total available credit would be $2,500, and your credit utilization ratio would decrease to 20% ($500 is 20% of $2,500).
All other things being equal, this could very likely result in an improvement of your credit score. But this only works if you don’t increase your spending too much, too. You may be able to spend more while keeping your utilization relatively lower, but don’t take advantage of the higher limit by overspending.
If you already tend to have very low credit utilization each month, increasing your credit limit won’t do as much for you in this respect. Most credit experts recommend keeping your credit utilization ratio at 30% or below.
When you request a credit limit increase the issuer may perform a hard credit inquiry, which may result in a short-term minor credit score decrease. However, if the issuer gives you an increase automatically, there is no hard inquiry.
More Purchasing Power
This is very simple: A higher credit limit gives you more purchasing power. You can spend more with your card before maxing out.
Once again, the same warning about not overspending applies—only charge as much as you can pay off each month, and pay off your credit card in full each month to avoid racking up interest.
More purchasing power is especially useful if you have a low credit limit, like $500, and it’s not enough to meet your monthly spending needs. Being able to comfortably put all of your spending on a single card each month, if you want to, is convenient. Compared to spending with multiple cards each month, it also creates less room for error and missed payments.
If you have a very high credit limit already, which is sufficient for your typical monthly spending, an increase won’t affect your purchasing power. But if you tend to use a large proportion of your available credit each month, an increase could still help your credit score by reducing your utilization.
Credit Limit Increase vs. New Credit Card
If you’re looking for a credit limit increase, chances are you want to spend more with the card. Maybe you want to put more of your everyday spending on the card to earn more rewards. Maybe you have a big upcoming purchase you want to put on the card, and you’ve budgeted to pay it off over time (hopefully with a 0% interest rate, if possible).
If you need extra credit, you have two basic options. You can try to get a credit limit increase on a current card, or you can apply for a new credit card. While getting a new card might be attractive for many reasons, like introductory bonuses and rewards, it might not be the best choice if you only want it for a specific purchase.
Generally, you should only open a new credit card if you plan to use it with some regularity for some time to come. This is especially true if there’s an annual fee. Having more credit cards is not bad for your credit, in and of itself, but each card represents an important financial decision that you shouldn’t take lightly.
If you have good use for a new credit card and you understand how to use it responsibly, then by all means, go ahead and apply. But if you just want a bit more purchasing power, you may be better off with a credit limit increase.
Getting a new credit card has several effects on your credit, some good and some bad. The initial hard inquiry from the application may have a slight negative impact. However, the new credit limit will add to your total available credit, which can reduce your utilization and improve your score (this is a relatively big factor). But, with the new card, your average length of credit will also decrease, which can hurt your score (length of credit makes up 15% of your FICO credit score).
How to Request a Credit Limit Increase
If you’ve decided to ask for a credit limit increase, you need to figure out how to do it and consider how to reduce your chances of being turned down. Asking for a credit limit increase is a lot like asking for credit in the first place, with the same creditworthiness factors at play.
The timing of your request may be an important factor, and it may also play a role in how high your credit limit can be. Consider how long the account has been open. If you recently received the credit card, you may want to establish some history with the account before asking for an increase.
It’s probably not the best time to ask for an increase if you have some recent late payments or are currently behind on your payments. Try to establish a good track record of paying your bill by its due date before making your request for the best chances of success.
When you feel ready to make a request, you usually have one or two options:
- Call the number on the back of your card and ask a representative for a credit limit increase
- Check your online account dashboard or mobile app for a credit limit increase request option
Be prepared: The request may be granted instantly, or it may take some time. In some cases, the issuer may ask some personal questions about your current employment and income. They may ask you to explain why you want a higher credit limit.
Be honest, but use this as an opportunity to make yourself look good. Point out if you have a high FICO score or are a longtime cardholder. Card issuers understand that there are a lot of other companies out there; as long as you are a good borrower, they want to keep you as a customer and not lose your business to someone else.
Frequently Asked Questions (FAQs)
Is It a Good Idea to Increase Your Credit Limit?
Yes, it’s generally a good idea to increase your credit limit—unless you’re worried about overspending. A higher credit limit gives you more purchasing power and it can reduce your credit utilization, which can improve your credit score. Be aware that credit limit increase requests may require a hard credit inquiry (if so, this will be disclosed when you make the request).
How Much of a Credit Limit Increase Should I Ask For?
Some issuers allow you to request an increase of a certain amount, while others don’t. If you are able to request a certain amount, there’s probably no harm in aiming high. A typical increase may be around $500 or $1,000, but this can vary quite a bit depending on the card issuer, the account history, and the credit history involved. The higher your starting credit limit, the higher your increase request may be—up to a point.
Is It Better to Open a New Credit Card or Increase My Credit Card Limit?
It’s generally quicker and easier to request a credit limit increase than it is to open a new credit card, so that may be the wise first option. If you just need a bit of extra purchasing power, this may be all you need. But, if you’ve investigated a new credit card and are happy with its rewards and perks, and accept its terms and fees, there’s usually no reason not to open a new credit card—as long as you’ll use it with some regularity.
How High Should My Credit Limit Be?
The right credit limit for you depends on your financial situation and credit history. Generally, the higher your income and the better your credit, the higher your credit limits will be. It’s good to aim for a credit limit that allows you to cover all of your monthly spending with a good deal of wiggle room, in case of emergencies and for the health of your credit. The lower your credit utilization, the better it is for your credit; 30% or below is ideal. The credit limit you need to achieve that utilization ratio will depend on your typical monthly spending.
The Bottom Line
Increasing your credit limit can have some quick, clear advantages. The biggest are increasing your credit score and increasing your purchasing power. Credit limit increase requests are usually easy to make, and they’re generally worth looking into now and then if the issuer doesn’t automatically raise your limit. Just remember to maintain your budget and not start overspending as a result of your increased borrowing power—otherwise, you’re throwing those benefits away.
