Should You Increase Your Credit Card Limit?

Most Canadians probably don’t think about their credit limit very often, but it can have a pretty big impact on their credit score. Whether you want more credit to boost your credit score or to make a big purchase soon, getting a credit limit increase can help.

Below, you'll find information about how much to ask for, when to apply, and steps you can take to improve your chances of approval for a credit limit increase.

Should you increase your credit card limit?

At first, it may seem like a no-brainer to increase your credit limit. It boosts your credit score, can prepare you for emergencies, makes it easier to get the best possible terms on a car loan or mortgage, and allows you to make large purchases.

On the other hand, more credit means a higher potential for more debt. If you’re already struggling with paying off your debt, or if you don’t trust yourself with more credit, it's wise to leave your credit limit as-is for now.

Pros and cons of increasing your credit card limit

There are undeniable benefits to having access to more credit, but there are a few significant drawbacks to consider, too.

Pros

• Increasing your credit limit reduces your credit utilization: Lenders want to see that you’re responsible with credit, which means a low credit utilization ratio (ideally under 30%). To find your credit utilization ratio, divide your total monthly debts by your total monthly income.
• You can use the higher credit limit in case of emergencies: You should have a separate emergency savings fund, but a higher credit card limit can offer peace of mind while you build one.
• You can make larger purchases (and earn more rewards): If you know you have to make a large purchase soon, and your current credit limit can’t handle it, you could consider increasing your credit limit for it. That way, you can accumulate a pretty sizable amount of reward points in a single transaction.

Pro tip: To lower your credit utilization ratio, pay down your existing debt. Whether that’s credit card debt, education debt, car payments, or personal loans, it all contributes to your credit utilization.

Cons

• You may be tempted to spend more: If you often find yourself maxing out your card, having a higher credit limit can make it more difficult to be disciplined with your spending. You may find that a higher limit pushes you into credit card debt.
• Your credit score can take a hit: If your credit card issuer runs a hard credit check before increasing your credit limit, your score could drop a few points. This isn’t a huge deal if you rarely request credit increases, but if you’re frequently applying for credit, you could really damage your score.
• You could hurt your chances of getting other types of credit: You may want to wait to request a credit limit increase if you’re shopping around for a mortgage or auto loan. Lenders get worried when they see you applying for multiple new credit products.

How to increase your credit limit

Often, your bank will approach you and ask if you want to increase your credit limit. In that case, all you have to do is say yes. It's sometimes offered via your online banking portal, and ATMs have advertised the service as well.

If the bank hasn't reached out to you, you're also free to request a credit limit increase, either via telephone, online, or in person. You’ll usually have to update your income information and list your monthly debts, so your lender can determine how much more credit you can comfortably handle.

You can also try upgrading your credit card if your credit score is good enough and you meet all the requirements. For example, if you took out a basic credit card but improved your credit score significantly, you could upgrade to a premium card with a higher limit.

When should I ask for a credit limit increase?

If your finances are in good shape and you need more credit, it’s a good time to ask for an increase. It can be very helpful if you’re planning a trip or have a big purchase to make.

You might also want to increase your credit limit if you’re trying to build your credit score.

As far as how often you can apply, Scotiabank advises that you wait 4 to 6 months after requesting a credit limit increase before applying again.

What happens if your credit limit increase request is denied?

When you request a credit limit increase, your credit card issuer looks at your income, total debt, and credit utilization ratio. If your credit score is too low or your credit utilization ratio is too high (meaning you have too much debt or your income is too low), your request will likely be denied.

It can be disheartening when this happens, but there are steps you can take to improve your chances of getting approved next time:

• Pay down debt: This could require creating a new budget plan to help you prioritize which payments should be made first.
• Improve your credit score: Be sure to pay your credit card bill (and all other bills!) on time every month. Consistency also helps, so stay in the same home, at the same job, and with the same bank for as long as you can.
• Monitor your credit report: Check for any errors or potential fraud that could affect your score. You may be able to do this through your bank or with a third-party service like Credit Karma or Borrowell.
• Boost your income: Request a raise or promotion, or try a new side hustle as a means of increasing your overall income. This can help to reduce your credit utilization ratio.

Although these suggestions take time, you’re improving your overall financial health, which is definitely a good thing.

Should you accept pre-approved credit limit increases?

The short answer is yes, you should accept a pre-approved credit limit increase.

Accepting shouldn’t affect your score, which is one of the main concerns for those applying for credit. As long as you continue to use your credit responsibly, a credit increase can only be a good thing.

Keep in mind, though, that lenders won’t pre-approve you for a credit increase if your card is maxed out or you frequently miss payments. Therefore, if you’re offered a pre-approved credit increase, chances are you can handle it.

FAQ

Is it good to increase your credit card limit?

It’s usually a good idea to increase your credit limit, since it provides you with more available funds and lowers your credit utilization ratio. However, you should only request a credit limit if you're quite certain you'll be approved.

What is a reasonable credit card limit increase?

If your credit utilization ratio is under 30%, you can ask for a modest increase, usually between 10% and 25%. It’s better to aim lower and have your card issuer offer more than to be denied for a big request.

Is it better to have a credit card with a high limit?

Usually, it’s good to have a high limit so your debt-to-credit ratio can stay low. However, if you struggle with maxing out your credit card on the regular, you probably don’t want the temptation of a high credit score.

Does it hurt my credit to ask for an increase?

It typically doesn’t hurt to ask, but your credit score could take a slight hit if your bank pulls your credit report. Usually, the impact is pretty small, and it only affects your score for a short period of time.