What’s the Best Way to Increase Your Credit Limit?

Most increases of credit occur with a request from the consumer to the issuing lender or creditor. The credit increase process for many consumers isn’t typically very difficult. With a credit card the process can be as easy as a few clicks of the button. If your information is already on file and hasn’t changed you might

How Do Credit Increases Work?

You will typically be asked to either input or verify different types of information like your annual/monthly income and monthly expenses. Creditors are essentially looking to do a simple processing of your debt to income ratio. This process is relatively straight forward and shouldn’t take more than a few minutes. Moreover, if you already have information on your file, you will typically only be required to verify it and denote any changes. If your income and all other information have remained the same you can look to simply re-apply the same numbers that you have on file. Try to provide honest and accurate numbers as these numbers typically aren’t verified and you don’t want to get yourself into extra trouble by being overleveraged.

How Do Credit Limit Increases Happen?

Credit limit increases can actually occur naturally by themselves (sort of) or they can be requested by consumers. When they occur on their own this is typically due to the fact that a creditor had requested to review the consumer’s credit report through a tertiary credit check and they noticed that they’ve have good credit history and so decided it’s likely the consumer is a good credit risk. Due to them being a good credit risk, they decided to raise the credit limit of the consumer automatically. Automatic credit limit increases are much more likely to occur with new accounts or accounts after accounts hit certain time benchmarks, like one to two years after opening a credit card account and demonstrating good payment history.

What Improves the Likelihood of You Getting a Credit Rate Increase?

The most important factor used to determine whether you are eligible for credit rate increases is the debt to income ratio. The credit limit questionnaire most credit card companies have you fill out is a simplified version of a budget that is essentially determining an approximate DTI for you. Similar to a budget calculator you’ll add up your monthly expenses by answering whether you pay rent, have a mortgage, etc., and add up your total income.

Are There Any Benefits to a Higher Credit Limit Besides More Spending Power?

Yes. There are benefits to having a higher credit limit instead of just increasing purchasing power and credit availability. Having a larger credit limit is a net positive for your credit worthiness and will have a positive impact to your utilization rate. The more available credit you have and the less available credit you use, the better your average utilization rate will be. This in turn will be a net positive for you and your credit score.

The Best Way to Increase Your Credit Limit

The Best Way to increase your credit limit is simply by being honest and upfront about your financials. Most data collected from credit card companies isn’t verifiable or going to be verified after the fact so the application but that doesn’t mean you should attempt to game the system.