Saturday, 26 September 2020

4 Simple Ways To Increase Your Credit Limit

I won't be telling you all the ways to increase your credit limit. Your credit limit plays a big role in your credit score. Having a higher credit limit helps you have a lower credit utilization, which in turn boosts your credit score.

Why You Want To Have A Higher Credit Limit?

As we all know, by having a higher line of credit this allows you to have more access to money. This could be a good thing, or a bad thing depending on how you look at it. But in a positive light, having more access to money gives you more leverage to do things with your money. Credit utilization makes up about 30% of your credit score. 

What Is Credit Utilization

It's basically how much credit you're using compared to the credit that you have available. So generally the lower your credit utilization, the better will be for your credit score.

But where does your credit limit plays a role?. Let me give you a real-life example between Bruce and Jackie

Say that Bruce has a credit limit of about $10,000 on all of his credit cards, and Bruce has a balance right now of $3,000. Currently, his credit utilization is 30%.

But now, let's talk about Jackie

Jackie has a credit limit of about $30,000 among his credit cards, and Jackie also has a balance of $3,000. So in this instance, Jackie only has a credit utilization of 10%. 

So for Bruce to have the same credit utilization as Jackie, which is 10%, Bruce can only have a balance of $1,000 on his credit cards.

If you're reading this article, then you probably have some experience with credit cards so knowing having a balance on your credit card is never a good thing.

Now, let's talk about the actual ways to raise your credit limit 

1. Automatic Increase

Probably the easiest and most passive way to raise your credit limit is to wait for an automatic increase. The majority of credit card companies increase your credit limit automatically without you even having to ask them for it. You can see an automatic credit limit increases every six to twelve months or so depending on how good you are as a credit user. So if you're making your payments on time, paying your balances in full every month, you're more likely for a credit card company to increase your credit limit automatically. 

Another way to increase your likelihood of getting an automatic increase is by keeping your account up to date. Most importantly your annual income. If you use a specific credit card frequently, you're more likely to get an automatic increase due to the fact that every time you swipe your credit card, the credit card company is making money from them. The good thing about automatic credit line increases is that there won't be a heart inquiry on your credit report, so depending on your bank most banks will notify you if there is an increase to your credit limit. The only downside is that it is random, and you cannot expect them to automatically increase your credit.

2. Request It

Just keep in mind that when you are requesting a higher credit limit some banks will do a hard inquiry on your credit report. There is a long list that you can find online where it goes into detail of which banks does a hard pull or a soft pull. For me, sometimes I do dig a little bit deeper to see which banks do a hard pull, but I always expect one to be done anyways, even if they don't. Just keep in mind that when you do request for an increased line of credit, and there is a hard pull, you may see a little thing to your credit score, but that should resolve after a few months, and after about two years hard inquiries disappear from your credit score. So before you even request a credit limit increase make sure you have your facts in order because it would be much easier to get an increased line of credit if you making more money or if your expenses are less, and you have more disposable income. This makes credit card companies safer but giving you more access to money when they know that you have more disposable income to pay them back.

To request for a credit limit increase, you can do this a couple ways, the typical millennial way is to do everything online. For example, I have a credit card with USAA, this is a military bank and I have the cashback rewards plus a credit card with them, and when you scroll to the very bottom of the website and take a look at a bunch of links that they have, and there's one that says change your credit limit.

Once you click on that, this opens up a window and it gives you an option to increase your credit limit or lower it.

As you can see here, they say that they do look at things like your account history, your income, and your current debts to make a decision.

So depending on who you bank with, and maybe similar to this, or a little different, not all banks will allow you to request for a credit limit increase online. So this goes into the next way of requesting for one.

If you're someone who likes to talk to someone over the phone, this is probably gonna be the next best way. And if you don't, too bad. Some banks give you no choice. I know for sure that Chase Bank requires you to talk to them over the phone if you want to increase. So before you do this just make sure you have some information handy like your updated income, your monthly mortgage, or rental payments, and an idea of the increase that you want. The reason why I say have some proof ready is that you can use this information as leverage so the banks will be more likely to approve the credit limit. Because you should never request a credit limit increase if you're in dire need of a bigger TV, or expensive handbag because that just looks desperate. So you want to come across like you have more disposable income, and by having a higher credit limit this will allow you to make more purchases 

So let's be real, banks will give you more money if you have more money. Whether you're requesting a credit limit increase online or through the phone, they may ask you how much you would like to increase it to. Sometimes, I don't even have the specified number. When I request a credit for line increase, I just said hey, I want to increase my credit, and they usually bump it to wherever that they see fit. There are times where you do need a specific number, American Express is pretty well-known for this and they're pretty generous for credit limit increases. I hate telling you a specific number because this really depends on the card and the situation. Because if you had to discover it card which is a fairly common card for starters, they may give you a credit limit of say, $1,000, but after using it for a year, paying it on time, and using it frequently, they may bump it up to $3,000. That's about a 200% increase.

Now let's say that you have a Chase Sapphire credit card, and initially, they give you a credit limit of $20,000. But after using it for a few months your request for an increased line of credit, and they bumped you up to $30,000. Well, that's only a 50% increase but with almost a 50% increase, it's also a $10,000 gain on your credit limit. As you can see here, the differences between percentages gain or the total amount of money gained are pretty skewed. So depending on the type of credit card that you're requesting for an increased line of credit, just try to think of what best fits.

3. Get New Credit Card

I must say this is probably my favorite way of increasing my credit limit because all you really have to do is open up a new credit card. Once you open up a new credit card, this also increases your line of credit because each credit card will have a certain amount of credit that's attached to it.

Also, when you open up a new credit card you get signup bonuses while increasing your total line of credit while other methods they don't allow you to do that.

Just remember that when you do open up a new credit card there will be your hard inquiry on your credit history, so you will have a little thing to your credit, you may think that this is counterintuitive where you're trying to boost your credit score, but by having an increase on your credit limit to potential to reduce your credit utilization will likely boost your score in the long run. 

Plus, there's also a bunch of benefits by having multiple credit cards, for instance, having specific cards for specific categories can bring you more money and cashback or other perks, but there are downsides and opening more credit cards, for example, it does temporary lower your credit score, it shortens your overall credit history, you got to think about card management, and annual fees.

4. Secured Card

Secured credit cards are not only for people who are looking to build or repair credit, but they also can increase your total line of credit. The thing about secured credit cards is that your credit limit is your deposit. For me, I really don't like the idea of tiring my money to account just to have an increased line of credit. So this option really doesn't allow you to borrow more because it's kind of your money anyways, but this may help you boost your credit score much faster.

Things To Consider When Requesting For An Increased Line Of Credit 

Timing is important. It is probably best to wait to ask for an increase after you have gotten a pay raise at your job, currently have good credit, and paid off all of your balances. By looking great on paper and all of your accounts this will give you a better chance of getting an increase.

If you have credit card debt don't even bother asking for an increase. You're way better off increasing your credit score by lowering your debts.

Max Credit Limits

Depending on what credit card company you're trying to increase your credit line they may only increase a certain amount across all of your accounts. So imagine having a $30,000 credit line between your Chase Sapphire Preferred, chase freedom, and your Amazon Prime credit card. If you asked for an increase in your Chase Freedom Card this may prevent you from getting an increase in your other chase cards. Because the bank will look at your account credit limit as a whole. So in this case, you may be able to transfer your credit limits to other credit cards that are from the same issuer. So in situations like this, it really only affects cards that are from the same Bank.

Hard Pulls

When requesting an increase this may result in a hard pull, but if you do decide to apply for a new credit card this would definitely require a hard pull. a hard pull will be on your credit score for about two years and you will see a drop in your credit score for a few months. So just keep that in mind if you're thinking about getting a mortgage or any type of big loan.

Alright, folks, that is how to increase your credit limit. Hopefully, you got some value out this

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