Increasing your credit limit can give you more financial security, boost your credit rating, and enable you to buy higher-cost items. But increasing it the wrong way—like by getting too many approvals or by charging to the limit on your cards—can end up damaging your credit record. Here are five smart and responsible ways to increase your credit limit without sacrificing long-term financial common sense.
Maintain a good payment history
The ideal way to get a higher credit limit is to earn your lender's trust by paying the credit card bills in time each month. Payment in time for six to twelve months demonstrates that you are a responsible borrower. Your bank will automatically consider increasing your limit if you pay in full and on time each month. Your payment history is also your ace card if you want to apply for a credit limit hike yourself.
Use your available limit wisely
Before requesting a higher limit, show smart utilization of what you already have. Avoid using your card to its limit or regularly using 40-50% or more of available credit. High utilization is considered a signal to lenders that you are financially strained. Low utilization demonstrates that you are not too reliant upon credit and can manage a higher limit.
Ask at the right time
Time is of the essence. Try applying for an increase in the credit limit following a pay rise, promotion, or after you have lowered your overall indebtedness. The lenders will be more willing to provide it if your ability to repay has been improved. Emphasize your new higher income or lower liabilities when presenting your application—it strengthens your argument for an upgrade.
Avoid using too frequently
It's easy to ask for raises on a regular basis or on several different cards to increase your overall credit, but it can hurt you. With every new request, you will have a "hard inquiry" on your credit report, which will lower your score slightly. Instead of that, wait for at least 6–12 months between requests, and only apply when your personal finance has really improved.
Allow your bank to automatically upgrade
If you've had a card for several years, your bank will automatically send limit raises based on your payment and usage history. These are generally not hard inquiries and are more favourable to your credit score. Ensure that you've given the bank up-to-date contact and income information so you won't miss out on these pre-approved increases.
An increased credit limit can be a godsend to enable you to settle unexpected bills and establish your credit score—if you use it responsibly. Stick to a strict payment plan, monitor your utilization ratio, and space out your requests. This not only will it increase your limit but also establish a stronger, healthier credit profile in the long run.
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