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Keeping track of your credit score – a number that influences many important decisions in life that involve money – is a key part of managing your finances.
And while keeping a healthy score is an ongoing process that never really stops, there is something you can do now to boost your score. credit score quickly: request a higher credit limit on your credit card.
Increasing your credit limit increases your debt ratio, also called your credit utilization ratio, so you can see your score increase fairly quickly – over the next one to two billing cycles.
“The purpose of this increase is to increase your credit score and put you in a better position to earn lower interest rates on mortgages, auto and personal,” says Farnoosh Torabi, Contributing editor of NextAdvisor and host of the “So Money” podcast. “This is not about dragging yourself further into high interest credit card debt.”
Here’s how to increase your credit limit.
Options to get a higher credit limit
Asking for a credit limit increase is simple, but sometimes it can involve a bit of background work, depending on the credit card company. If you think it’s a good time to increase your limit, there are a few ways to ask.
1. Apply for a credit limit increase online
These days, you can usually apply for an increase in your line of credit online. Once you’ve signed into your account, look for an option to submit a request. You may be asked to provide additional personal information, such as income, rent or mortgage payments, or existing debt. Unless there is an online chat feature, requesting a raise online means you won’t be able to ask questions.
Before asking for a credit limit increase, ask your credit card issuer if a credit check is needed and if it is a firm or soft pull.
2. Call your credit card issuer
There is usually a customer service phone number on the back of your credit card. After you’ve called a representative, ask if it’s possible to get a higher credit limit. The representative may ask you a few questions, such as why you want a raise or if your income has recently increased. It is important to be honest about the reason for your request.
“When you call customer service, state that you want to increase your credit limit, not because you’re in dire straits. You want to prove to them that you’re going to be good for the money, ”Torabi says.
3. Wait for automatic increases
If you’ve had a credit card for a while and show that you’re responsible for it, your bank can increase your credit limit automatically, without you having to apply. You can increase your chances of getting an automatic raise by making payments on time and using your credit card frequently. But you shouldn’t have a large balance month after month. Basically, if you get an automatic raise, your card issuer thinks you are responsible enough to handle more credit.
“Staying in good standing with your credit card issuers is always a great strategy. It’s good for your credit, it’s good for your wallet, and it will work in your favor when you want to ask your issuer for credit limit increases, ”says Michelle Black, credit card expert and finance writer personal. “They will look at your account history and see how you have handled your current credit limit.”
4. Apply for a new card
If you don’t want to request a credit limit increase, applying for a new credit card is an option, as long as your payment history and credit score are good. The limit on the new card may not be very high, but it still increases your overall available credit. Beware that applying for new credit usually results in a serious investigation of your credit report, which affects your credit score. So, avoid applying for multiple credit cards at once.
How a Higher Credit Limit Can Help
Increasing your credit limit can have benefits if you are a responsible cardholder. A higher credit limit can increase your credit score as long as you keep your credit usage low and can make future borrowing less expensive. If your credit score drops in part due to a higher credit limit, you may be eligible for lower interest rates in the future.
Does Applying For A Credit Limit Affect Your Credit Score?
Whether an issuer conducts a thorough investigation of your credit before deciding to grant you a larger line of credit depends on their tolerance for risk.
This is why you should call your credit card issuer to see if there will be a hard or soft pull on your credit. Sometimes when you ask for a smaller raise, usually less than $ 2000, it will only trigger an informal investigation, which will not affect your credit score.
“Often the boost can be issued immediately over the phone, no credit check is required,” says Torabi.
But even if there’s a tough question, the benefits of a higher credit limit usually outweigh the temporary impact on your long-term credit score.
When not to increase your credit limit
Timing is important when it comes to requesting a credit limit increase, so you should only do so if it improves your overall financial situation. Ask yourself why you want a credit limit increase. If it’s for reasons like dealing with an emergency or paying for a vacation, you shouldn’t ask. You should instead focus on build up an emergency fund, and there may be other ways to deal with an emergency than using more credit. As for travel, plan and save for a dream vacation may take a while, but it can be done.
Don’t be discouraged if you aren’t ready for an increase in your credit limit. You can always request one later, when the time is right. Here’s when it doesn’t make sense to ask for a credit limit increase:
1. You requested too many lines of credit
It may be too early since the last time you applied for new credit or asked to increase your credit limit. Too many requests can signal lenders that you are in financial difficulty, especially if they arise within a short period of time.
This can be frustrating if you are trying to build your credit score, but you don’t want to look like a risky borrower. The best thing to do is to space out your requests and applications. Black recommends asking for a credit limit increase when you get a raise, so that you can take more credit responsibly.
2. Your credit score is low
Your credit score says a lot about your financial habits, so you probably won’t be approved for more credit. if it is not good. Lenders use your credit score as a decision-making tool to determine your risk as a borrower. So if your score is in bad shape, it is better to improve it first, wait a few months, and then ask for a credit limit increase.
3. You plan to spend
If you are in dire financial straits or looking to spend more money, asking for an increase in your credit limit is dangerous.
“If you really plan to use that extra credit and keep a balance month after month, this hack isn’t for you,” Torabi says.
It would only help you get more into debt. So, before you take any action, ask yourself why you want or need more available credit.