Knowing how to raise your credit card limit is important if you want to get higher financing to meet rising expenses. A credit limit is the maximum amount you can spend using your credit card. It is set by your credit card provider by analysing various factors like age, income, credit habits and others.
However, you can always opt for an increase depending on your financial needs. You need a good credit score, and your credit card provider may check other factors to approve the limit increase request. Understanding the process and applying the methods can maximise your chances.
How Credit Card Issuers Set Credit Limit
Your creditworthiness determines your credit score, ultimately defining your credit limit. When you apply for a credit card, your credit card provider checks certain factors like:
- Age
- Income
- Credit history
- Credit rating by bureaus
- Repayment history of loans
- Outstanding debts
- Type of credit cards you have
- Spending habits
The process of determining a credit limit also varies depending on the credit card provider. If a card comes with a set limit, it applies to all credit card holders. Nevertheless, issuers conduct extensive research before assigning the credit limit.
So, if you have a limited credit history, you may get a lower credit limit. After some time, you can approach the issuer to increase your credit card limit. They will decide your new credit limit after analysing the following factors:
- Spending habits
- Payment behaviour
- Credit utilisation ratio
Therefore, timely full payment is one way to ensure your credibility to increase your credit limit.
Why to Increase Credit Limit
There are several perks attached to having a higher credit limit, starting from instant access to more funds. Here are some other reasons why you should increase the credit limit on your credit card:
- It will help you increase your ability to finance a loan at a time of need
- At times of emergency, a higher credit limit comes in handy
- You can also spend more without worrying about the credit utilisation ratio going over 30%
- A lower credit utilisation ratio due to a higher limit improves your credit score
- Higher spending limits attract better opportunities to earn rewards
- You can afford big-ticket expenses without much hassle
Different Ways to Increase Your Credit Limit
If you are certain about increasing your credit limit, then proper planning and commitment can help you achieve it. Here are a few practical tips on how to raise your credit card limit.
- Set a Realistic Goal
Since the limit for your credit card is subject to your credit profile, avoid asking beyond a certain amount. Requesting your issuer to double or triple your existing limit may raise red flags for the issuer and make you seem credit-hungry.
- Improve Your Score and Wait
Most issuers will automatically increase your credit limit annually if you have a flawless record of repayment. By maintaining a good credit score, you will get a hike periodically. However, you need to be patient.
- Spend Responsibly
Utilising your credit card limit and not exceeding the credit utilisation ratio will imply good credit behaviour. It is a message to your credit card provider that you are not relying on your credit card for your daily expenses.
- Avoid Default
The best practice while using a credit card is to pay in full on/ before the due date. Otherwise, it can adversely affect your credit score. It is also crucial to avoid other penalties like late payments and high interest rates, resulting in debt accumulation. You can set reminders to avoid such issues.
- Pay Off Debts
Credit card issuers check your existing debt when you apply for a credit limit increase. Make sure to clear all your pre-existing loans for a better chance to increase your credit limit.
- Update Your Income Proof
If your income has increased and you want to increase your credit limit, you can submit your recent pay slips. Income is the most crucial factor for credit card providers in deciding credit limits.
- Applying for a New One
You can consider a new credit card with higher limits if your current credit card provider does not approve the request. Additionally, avoid applying for multiple credit cards in a short duration, which can adversely affect your credit score.
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Moreover, you earn 5X rewards on the top two spending categories per month, which you can use to save on your future transactions. Its full-stack mobile app allows you to check offers near you via GPS, so you never miss out on discounts. Apply now to get started!
