There’s a bit of a Catch 22 when it comes to applying for a credit card limit increase: A higher limit can boost your credit score, but asking for an increase can also hurt your credit score, temporarily. And if the lender rejects your request? You just dinged your credit score for no reason—which can be literally the opposite of what you were trying to do in the first place. Here’s how to ensure that you’ll be approved for a limit increase before you apply.
Wait, how does a credit limit increase improve my credit score?
Credit bureaus base 30% of your credit score on your credit utilization ratio, which is a measure of how much available credit you don’t use (the less you use, the better). By requesting a higher credit limit, you can easily boost your score, which, in turn, makes it easier to qualify for loans.
To request a credit limit increase, contact your lender, either online or by phone (using the number on the back of your card). The downside is that the process often involves a hard inquiry on your credit, which can knock your credit down by about 5 points, usually for a few months.
How do I know whether I’ll qualify for a credit limit increase?
Unfortunately, lenders are a bit vague about whether you’ll qualify. However, there are ways to improve your chances of getting a limit increase:
- Your income or credit score has recently increased: If you’re making more money or have better credit than when you first applied for the card, that’s often all you need to get an increase.
- Know your financial situation (and be accurate): Your lender may want to know information like your total annual income, employment status, and monthly mortgage or rent payment. In some cases, they will verify this before approving the increase, so make sure the information you provide is accurate.
- Don’t get greedy: A common rule of thumb is to ask for a 10 to 25 percent increase to your credit limit.
- You have been paying off your monthly balance on time: You’ll want at least a few months of consistent repayments to seem like a trustworthy borrower.
- Apply when your credit utilization is already low: You don’t want to seem desperate for more debt than you already have, so try to keep your debt usage to less than 30% when you apply.
- Time your request strategically: A hard inquiry will only damage your credit score for a few months, but that could still hurt your ability to qualify for loans with favorable interest rates. Therefore, consider holding off on a credit limit increase if you’re planning to finance a big purchase, like a home or a car. Also, don’t apply for a lot of loans and credit cards all at once, as that can be a red flag for lenders.
You can also ask if there’s a hard inquiry with your request—some requests only require a soft inquiry into your credit, which means they won’t hurt your credit score at all.