There are several reasons you might want to ask your credit card issuer to increase your credit limit. One is that you may be planning some travel or major purchases that could cause you to bump up against your current limit. Another is that you might hope to raise your credit score by improving your credit utilization ratio. That's the amount of debt you have outstanding at any given point compared with the amount of credit you have available to you. A higher credit limit can mean a higher score—as long as you don't go out and charge more than you normally would.
But it's entirely up to the lender whether to grant you that increase. Here's what you need to know about how lenders make the decision to approve a credit limit increase or deny one.
- When you apply for a credit limit increase, the lender will usually check your credit report at one or more of the major credit bureaus.
- The lender will most likely also ask you about your current income (which isn't on your credit reports).
- If your request is denied, the lender is required by law to tell you why.
- Typically you shouldn't request an increased credit line more often than every six months, unless you've had a significant increase in your income.
Why Credit Limit Increases Are Declined
When you request a credit limit increase from your credit card provider or other lender, it will review your past payment history both with it and any other financial institutions you have credit accounts with. It will do that by pulling your credit reports at one or more of the three major credit bureaus.
Among the things it will look at are your current credit utilization ratio and your history of past payments. If your credit utilization ratio is high, that could mean you have racked up too much debt already, making you a poor candidate for a credit limit increase. If your credit report shows a number of missed or late payments, that's also a red flag to the lender. One of the most detrimental marks on your credit report would be if you have ever defaulted on a credit card or loan.
A common reason that applicants are turned down for a credit limit increase is insufficient income. The card issuer wants to see an income that can reasonably support the amount of credit you have requested. For example, if you only make $20,000 per year, do not expect your credit limit to be increased to $15,000. Your income is not shown on your credit reports, but the lender will likely have requested it when you applied for the increase.
Because your lenders will look at your credit reports in deciding whether to raise your credit limit, you may want to check your credit reports even before you apply. By law, you can obtain free copies from each of the three major bureaus at least once at year at the official website, AnnualCreditReport.com. If you find any errors that are likely to be detrimental to your application, you should ask the bureaus to correct them.
What to Do if Your Request Is Declined
If your request for a credit limit increase is denied, the lender is required by law to tell you why. This is known as an adverse action notice, and it will usually come in the mail. If, for some reason, you receive no explanation, you should ask the lender. Its customer service reps will either discuss this with you over the phone or, more commonly, send you a letter listing the reason for your denial.
What should you do next? One tactic you might consider if you need more access to credit is to submit a new request for a lower amount. Sometimes the credit card issuer will counter your request and offer a credit limit that it considers acceptable. Alternatively, you might seek out a different issuer that can offer you more lenient terms.
In addition, you probably want to address the issues that the lender said resulted in its denial. For example, if your credit score was too low, you can begin to take steps to raise it. Those including making sure you pay all your bills on time and not using too much of the credit you already have available to you.
Why Would You Be Denied a Credit Limit Increase?
You could be denied a credit limit increase for many reasons, such as a history of late payments, too low of a credit score, too little credit history, too many recent applications, or an inadequate verifiable income. If you were already approved for a credit limit increase recently, that could be another reason.
Does Asking for a Credit Limit Increase Affect Your Credit Score?
That can depend on your credit card issuer. If it does what's known as a soft credit check, it will not affect your credit score in any way. If the company makes a hard credit check, that may lower your score a bit, but usually only temporarily.
How Often Can You Request a Credit Limit Increase?
In theory, you can request a higher credit limit whenever you want. Many card issuers make it easy by allowing for increase requests on their website portals. However, issuers generally say it's best to wait about six months between requests, unless you've had a significant increase in salary in the meantime.
The Bottom Line
Requesting a credit limit increase is common practice, especially if you are new to having credit cards and find yourself well below the average credit limit (currently around $30,000, according to the credit bureau Experian). Before you apply, however, it's worth checking your credit reports so you know what information the card issuer will be using to decide on your request.