If you want to boost your credit score, do not forget about how much your credit utilization rate affects your overall score. Coast Tradelines wants to give you ways to increase credit limit and provide insights on the benefits that higher limits offer.
Reasons To Increase Your Credit Limit
Even if you never come close to maxing out your current credit limit, having a high credit limit helps you increase your credit score. Your overall credit utilization makes up 30% of your credit score. Specifically, your credit utilization rate is your credit card debt divided by your credit limit. For instance, if you have a credit card with a $10,000 limit and you have a $5,000 balance on it, your credit utilization rate is 50%. The lower your rate, the more it helps boost your credit score.
Tips for Increasing Your Credit Limit
There are several ways to boost your credit limit. After having a credit card for a while, issuers often automatically increase your limit, so you can wait until that happens. That said, you have a better chance of your issuer increasing your limit if you have a history of on-time payments and responsible card usage.
If you have two cards from the same bank, you can try to shift your credit limit from one card to the other. Not all customers qualify for this option, so do some research into your bank or credit card company before attempting this strategy. You can make the most of this tip by opening a brand-new credit card account with your issuer if doing so lets you take advantage of signing bonuses.
You may have to personally reach out to your credit card issuer online or over the phone to request a higher limit. If you contact your credit card company online, expect a hard credit pull, which can negatively affect your credit score. Speaking with a representative over the phone may result in a soft credit pull. Either way, you must likely provide your employment status, total annual income and your monthly mortgage or rent amount. The representative may ask why you feel qualified for an increased limit or what you plan to do with your new limit.
Opening a new card account increases your credit limit, but make sure you use the new account wisely. For instance, you can apply for a card that offers cashback and use it for everyday purchases, gas and groceries. Pay off the balance every month to enjoy the benefits without incurring interest payments.
Timing Your Request for an Increased Credit Limit
You must time your requests to better your chances of receiving approval. When you already have a high credit score, recently received a raise or access to more income, do not have hard inquiries littering your report or have not requested a higher limit in the last six months are all great situations for asking for a limit increase. Another is when you show yourself to be a responsible cardholder for the past six months.
There are also times when you should not ask for a limit. For example, a pay cut, job loss, poor credit score, a lackluster repayment history, a high utilization rate and a credit card account fewer than six months old are all times when you should hold off on requesting more credit. Work on improving your situation before reaching out to your credit card issuer.
Calculating Your New Credit Limit
Another aspect of receiving approval for your new limit is determining how much of an increase to request. One of the best things you can do is to ask how much of an increase you can receive without a hard pull on your credit. If you have a specific limit amount in mind, you can ask for more than that. Even if the company denies that number, you can still find out their limit for increasing your limit.
Disadvantages of Increasing Your Credit Limit
For all the benefits, there are some drawbacks involved with asking for more credit. Of course, you must beware of credit inquiries. Additionally, some credit card companies charge fees for customers to boost their credit limit, so do some research to see if this could be the case for your issuer.
You must also ask yourself if you can exercise self-control after successfully receiving more credit. Knowing that you have access to more money could compel you to spend more, which may harm both your credit score and your credit report. Only you know whether you may give in to this temptation. One useful tip is pretending that you have the same limit after receiving additional credit.
Do you think your credit score could benefit from a more generous credit limit? To learn more tips about making the most of your credit card, reach out to a Coast Tradelines representative today.