You’re ready to take on a higher credit limit. Maybe you’re gearing up for a large purchase or you’re just ready to take on more responsibility. Increasing your credit limit is a great way to show your bank and the credit bureaus that you can handle a larger loan, which can really help you out a lot when you decide to take the plunge on a serious life event — like buying a car or home. However, if your credit score isn’t in an optimal spot just yet (like many of us), you might need to work on some things before you can be approved for that credit limit increase.
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Is Increasing Your Limit a Good Idea?
Absolutely! As long as you feel like you can manage the amount of credit you have, increasing your limit is never a bad idea. Essentially, you’re telling the bank that you can be trusted with more money. Not to mention, if you do get a credit limit increase and you still keep your balance low, your credit utilization ratio will look great. You’ll only be using a small portion of what is being offered to you, which is very important for a good credit score. If you’re already practicing good credit habits, increasing your credit limit can only further show how consistent you are with your finances and credit choices.
When Should I Increase My Limit?
Having a few credit cards open is a good thing for your credit. It truly helps to keep your credit utilization ratio low, especially if you’ve got some other larger loans open (like a car, home loan, or other personal loan). Just remember to use each of your cards every once and awhile. Keeping them open and then not using them also does nothing for your credit. It’s the action of using credit and then paying it off that add positive information to your credit history.
If you’ve got a secured credit card, you might want to start with increasing the limit on that card before you increase the limit on any other credit cards, or think about getting an unsecured credit card. If you’ve read one of our other articles about credit cards, you might know that closing credit cards isn’t a bad thing, but it doesn’t do anything good for your credit score. So, if your goal is to increase your credit score and increase your credit limit, I wouldn’t suggest closing any lines of credit unless you feel like you really need to.
With that being said, I do suggest increasing a secured credit card first, then moving on to your other credit cards. You’re able to check your credit score for free once per year, so you should know where your credit score is and where you want it to be. If you’ve worked on improving your credit score for at least six months and you’ve made some headway, talk to your bank about increasing your credit limit. Before they run any credit checks they can let you know if increasing your credit limit sounds plausible. If they think it’s a good fit for you, especially in preparation for a larger commitment in the future, they’ll go ahead and make the change.
In addition, banks will commonly let you know if you’re not quite in the perfect spot for a credit increase. Ask for their advice! They are the professionals. They might tell you to work on your credit for another six months to a year or it could be one particular loan that is holding you back. You might have to work on lowering that particular balance before they’ll approve you for your new limit.
What Kinds of Things Will Boost My Credit Score?
Any type of loan that you currently have open will affect your credit score. This could be a credit card, a home loan, an auto loan, or a personal loan. Making responsible decisions for lines of credit is the first step towards giving your credit score a little boost. Stay cognizant about when your bills are due and make sure to pay them on time. If you have a fair credit score, but you’re just not sure why it hasn’t risen to good or excellent, it could be because of something as simple as a few late payments, which is easily remediable.
If you’re already on top of that, but you’ve got a few credit mistakes (like loans defaulted to collections, many late payments, too much debt etc) there are some things you can do in addition to working on your current lines of credit. Secured credit cards, like we talked about earlier, are a wonderful first step towards building or rebuilding credit. Secured credit cards require a deposit and as such are easy to be approved for. Yet, they work the same way that a regular credit card does. Opening a secured credit card while you work on the rest of your credit can give you that extra little boost that you might need to get your score where you want it, and fast.
It’s incredibly important to work on your current credit cards before you even think about asking for a credit card limit increase. If your balance hasn’t been lowered in a while and you’re just making the lowest monthly payments possible, I’d say this is where you should focus if you want to have your bank approve you for more credit. Of course, other loans are important to take care of too, but specifically your bank is going to look at what credit cards you have open and how you treat them in addition to what is on the rest of your credit history.
How Long Will It Take Before I see Results?
That completely depends on the current state of your credit score. If you’re already in a pretty good spot, it might not take too long to cancel out any residual negative effects that may have been lingering in your credit history. However, if you’re suffering from a lower credit score, it might take a bit longer to get your score into a more desirable range.
Plan on working on your credit score for at least six months. That is a pretty good rule of thumb no matter who you are or what the current state of your credit score is. Those who have extensive credit damage may want to think about working on their credit for a couple of years. In the credit world, changes can be slow, especially if you’re trying to repair some serious issues, so you have to be willing to put the time in that is necessary to change your credit score for good.
If you think about it, putting in a couple years of good habits (then keeping those habits in practice) is not a bad trade off for a lifetime of good credit scores. Just the peace of mind alone knowing that you can be approved for anything that you need is worth putting in some hard work to get your credit score where you want it to be.
Increasing your credit limit is a great idea in order to pave the way for good credit for life. If you’re not quite there yet, don’t worry. There are plenty of actions you can take in order to get into your desired credit range. Once you’re there and you decide to increase your limit, just keep your good credit habits consistent and your score will only get better over time. You’ll thank yourself later when you decide to apply for that much larger loan that you’ve been wanting to pull the trigger on for some time. You can do it!
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