Raising a credit card’s limit is just a way to spend more than you can afford, right? Not always. In fact, increasing the limit can have a number of upsides if you manage your credit wisely.
For instance, it can assist you in efficiently handling large purchases, repairing your credit, or using credit to cover an unexpected expense. A higher credit limit can even boost your credit score.
In fact, there are at least six reasons why it can be good to increase your credit limit.
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Lowers Your Credit Utilization
If the amount of credit you are using is nearly equal to the total amount of credit available to you, the FICO credit-scoring model will lower your credit score. This is because creditors believe you run the risk of accruing excessive debt, which will make it harder for you to make payments in the future. Because of the way the scoring model operates, even if these risks don’t really apply to you, your credit score may decrease as your credit utilization ratio rises.
For instance, if your credit limit is $2,000. You regularly settle your balance each month, which is approximately $1,800, so you are utilizing 90% of your available credit. As long as you charge about the same amount as before, raising your credit limit will decrease the percentage of funds used, lower the credit utilization ratio, and should improve your credit score.
Credit experts generally recommend keeping your credit utilization ratio at 30% or below.
Lets You Make Large Purchases Efficiently
As you are already aware, using a credit card to make large purchases is easy and can earn you rewards. You may be surprised to learn that there are probably a number of consumer protections on your credit card that can help you in the event that something goes wrong with your purchase. For example, Mastercard’s protections include extended warranties, price protection, and coverage for damaged or stolen items. American Express offers similar benefits.
Check your credit card agreement to see what protections and restrictions apply to your cards.
How To Increase Your Credit Limit DRAMATICALLY
FAQ
Is there a downside to accepting a credit limit increase?
Does accepting a higher credit limit affect your credit score?
Does pre approved credit limit increase affect credit score?
Do credit limit increase help your credit score?
How much credit do you use if your credit limit increases?
Here’s a quick example. Let’s say you have a single credit card with a $5,000 credit limit and a $2,500 unpaid balance. You are utilizing 50% of your available credit. If your credit limit increases to $7,500, your $2,500 balance becomes 33.25% of your available credit.
Why should I ask for a credit limit increase?
There are many reasons to ask for a credit limit increase. For example, you may frequently spend up to your credit card’s limit. Or, you may be looking to lower your credit utilization in order to boost your credit score and get a new rewards credit card.
Do I have to accept a credit limit increase request?
You still have to accept the credit limit increase – as they require your express consent to increase it to the pre-approved limit – but consider that option when offered to you if you think a credit limit increase is right for you. And, what happens if my credit card limit increase request is declined?
Can a credit card increase your credit limit?
Some credit card issuers may automatically increase your credit limit if you’ve used it responsibly for a certain amount of time. And, in the case of some secured credit cards, the issuer may even move you from a secured credit line to an unsecured credit line. When is it smart to ask for a credit limit increase?