How To Increase Your Credit Card Limit

Looking to increase your credit card limit? Whether you’re hoping for more purchasing power, better rewards, or an improved credit score, requesting a higher limit can be an effective strategy. You can quickly request a credit limit increase by calling your card issuer, submitting an online request, or visiting a local branch. Sometimes, you may even receive a pre-approved offer to increase your limit. This guide will walk you through the steps to request a credit limit increase and help you weigh the potential benefits and risks, so you can make an informed decision.

How to request a credit limit increase

There are 3 ways to request a credit limit increase:

• Call your credit card issuer's customer service line
• Submit a request through your online banking portal
• Visit a local branch

So long as you have had the credit card for a long enough time (typically a year or more) and have proven you can pay off your balance in full every month, you should be approved.

Some issuers offer pre-approved credit limit increases, which you can accept or decline.

What to do before requesting a credit limit increase

Before requesting a credit limit increase, here’s what you need to do:

• Ensure your employment status and income are correct
• Verify that all your personal information – address, phone number, etc. – is correct
• Review your credit report for errors or fraud
• Pay your current credit card balance in full, if possible

Even though the process is generally pretty quick, it's better to spend a few minutes double-checking so you don't run into any snags.

Factors lenders consider for a credit limit increase

When you request a credit card limit increase, your credit card issuer will evaluate several key factors to judge whether to approve your request. Here are the factors that lenders consider:

1. Credit score: Your credit score is one of the most important factors lenders consider. A higher credit score indicates you are a responsible borrower to lenders, making it easier to get a higher limit. Getting a score of around 700 will give you the best chance of approval.
2. Payment history: Lenders want to see a consistent track record of on-time payments (even if they’re only minimum payments). If you have missed payments, or have a history of late payments, your chances of getting approved may decrease.
3. Credit utilization ratio: Your credit utilization ratio measures how much of your available credit you are using. Keeping this ratio below 30% is ideal for your credit score and will help you get a credit limit increase. Increasing your credit limit can lower this ratio and boost your credit profile if your utilization is high.
4. Income: Income plays a key role in a credit limit decision. Lenders want to know that you make enough money to pay back what you borrow. If your income has increased since your last credit card application, update your issuer. It will increase your chances.
5. Debt-to-income ratio: The debt-to-income ratio (or DTI) compares your monthly debt payments to your monthly income. A lower DTI is favourable when applying for a limit increase, as it proves financial capacity to take on additional credit.
6. Length of time with current credit limit: How long you’ve had your credit limit can impact your chances of an increase. Issuers may prefer that you’ve had your account for at least 6-12 months before approving an increase, giving them time to review your habits and payment patterns.
7. Recent credit inquiries: If you’ve had many credit inquiries in a short time, lenders tend to treat this as a red flag. You may need to wait a while before trying again, as more applications will keep hurting your chances.
8. Overall credit profile: Lenders will review your entire credit profile, including all your accounts, credit mix, and outstanding balances. Having a well-rounded credit profile with various credit types will boost your chances.
9. Other issuer-specific policies: Outside of what you can control, lenders simply have their policies for approving credit limit increases. Some issuers may be more flexible, while others have strict requirements. It’s always a good idea to ask your issuer directly to know what to expect when requesting an increase.

What to do if your credit limit increase is denied

If your issuer specifies why you were denied, you can take the appropriate steps to fix it. If not, keep following good personal finance practices like:

• Paying off your different credit products on time and in full
• Lowering your credit utilization score
• Taking steps to increase your credit score
• Paying off anything that's currently in collections

Other circumstances hampering you include having a limited credit history and an underutilized credit card. In these cases, using your card responsibly will build your case to get a higher credit limit.

Pros and cons of a credit limit increase

Here are some reasons you should consider a credit limit increase.

Pros

• Lowers your credit utilization: Your credit utilization should never exceed 30%. Increasing the amount of credit you have available will lower your utilization rate, which will have a positive impact on your credit score.
• Cheaper and easier to get loans and additional credit: A higher credit score makes getting loans and favourable loan terms easier. This is because you'll be seen as more reliable and more likely to be able to pay the loan off.
• Gives you access to emergency funds: If you find yourself in an emergency and won't be able to pay for a bill in cash or with your current bank account balance, having a higher credit limit will give you the ability to fund the purchase.
• Helps you earn more rewards: If you have more wiggle room to put more purchases on your credit card, you'll be able to earn more credit card rewards. You'll be on track to get that free flight sooner or earn much more cash back.
• Allows you to make large purchases: A higher credit limit means you can make bigger purchases. Plus, high-value purchases are best placed on a credit card because of the extended warranty and purchase protection many cards include. Some cards even have price protection, which can refund you the difference (up to a certain maximum) if you find a cheaper price soon after your purchase.
• Helps you avoid a credit score hit: Opening a new credit card will subject you to a hard credit check, which will slightly impact your credit score. A credit limit increase doesn’t require a hard inquiry, so your credit score will remain unchanged.

Cons

• It’s tempting to overspend: You can rack up a higher balance with the extra freedom. If you aren't able to pay it off in full every month, you'll get hit with interest charges.
• Possible impact on your credit report: Some credit card issuers may perform a hard inquiry on your credit report when you request a credit limit increase. Although a single inquiry may not significantly affect your credit score, multiple inquiries in a short period can temporarily lower your score.
• Increased risk of identity theft: A higher credit limit can make you a more attractive target for identity thieves. If your credit limit increases, thieves could cause a lot more damage if they gain access to your accounts. It’s crucial to stay vigilant.
• False sense of security: A credit limit increase can create a false sense of security, leading you to take on unnecessary debt. While the ability to make larger purchases may seem appealing, you should ask yourself whether you need the limit increase or if you’re just adding to your debts.

Should I accept a pre-approved credit limit increase?

Sometimes, the bank will offer a pre-approved credit limit increase. If you accept, the increase will be applied immediately. This offer typically means that your bank views you as a reliable customer who consistently pays off your balance on time.

In many cases, accepting a pre-approved credit limit increase can be beneficial! It can improve your utilization ratio, potentially upping your credit score.

However, while a higher limit may seem advantageous, spending responsibly is essential. Higher limits could lead to more temptation to spend, and overspending could lead to disastrously high debts and interest charges.

If you don’t need it and are unsure if you’re disciplined enough with your spending habits, it’s okay to hold off for a while. If you keep up your good habits, that offer will likely still be on the table later.

FAQ

Is it good to increase your credit card limit?

Generally, yes, it’s a good idea to increase your credit card limit. You'll see benefits like having more wiggle room with spending, a chance to earn more credit card rewards, and potential credit score increases due to a better credit utilization ratio.

Does your credit limit increase automatically?

Though banks in Canada can offer you pre-approved credit limit increases, you will need to consent to them first – either online or in a bank.

How can I increase my credit card limit?

You can simply call your credit card issuer or bank if you have a good enough credit score and history. Alternatively, you may be able to apply for an increase through your online banking, but you'll have to poke around to see if that option is available to you.