The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
Banks try to strike a balance when customers open new credit card accounts. On one hand, banks want to offer cardholders a high enough credit limit that will allow them to spend as much as possible. But on the other hand, they want to limit their exposure to unpaid charges.
Ultimately, that leaves some cardholders with a smaller credit limit than they would like. Fortunately, cardholders can always request a larger credit limit.
There are several reasons why cardholders may choose to request a credit limit increase. Obviously, they may need to borrow more money to finance purchases. While credit cards are a convenient and secure method of payment, the high interest rates for unsecured debts make these products poor instruments of finance.
A better reason to seek an increased credit limit is to make large purchases that will be paid in full. For example, frequent business travelers require a large line of credit to charge airfare, hotel, rental cars, meals and other expenses. And even when paying all of these charges in full, a traveler’s credit line must be able to accommodate up to seven weeks of charges from the beginning of a statement cycle and the following payment’s due date.
But the most important reason to ask for a larger line of credit is for cardholders to minimize their debt-to-available credit ratio. According to the Fair Isaac Corporation, the creators of the FICO credit scoring formula, the debt-to-available credit ratio makes up 30% of one’s score. One way to improve this ratio is to reduce outstanding debt, but another way is to increase the total amount of credit extended. (You can check to see how your debt-to-available credit ratio is affecting your credit by getting your free credit score from Credit.com.) The latter can be done by opening a new account or simply by requesting a credit limit increase from an existing credit card.
On occasion, banks will occasionally offer customers an unsolicited credit line increase. But more often, cardholders must take it upon themselves to make the request. When considering an increase, banks will look at several factors including the cardholder’s record of payment with the bank, their current income, and their credit score.
The good news is that most credit card users will show some improvement in these areas since their initial application. Most cardholders will have established a payment history, and people’s income tends to rise over time.
Asking a card issuer to increase your credit line can give you the purchasing power you need while raising your credit score. Remember, there is little to lose simply by asking for a credit limit increase; the worst thing that a bank can do is say “no.”
[Credit Cards: Research and compare credit cards at Credit.com.]
Image: iStockphoto
April 9, 2024
Credit Cards
October 21, 2020
Credit Cards
August 3, 2020
Credit Cards