How and why to increase your credit limit

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A good credit rating can open a lot of financial doors, giving you lower interest rates and a better chance that any loan you need will be approved.

One of the main components of your credit rating is your credit limit – the maximum amount you can borrow with each of your credit cards and other credit accounts. Maybe it’s time to ask for higher limits on your credit cards to increase your overall credit limit – and your credit score will thank you for it.

Just make sure you have the right reasons for taking this course and that you understand the pros and cons.

Higher limit, better score

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In most cases, if your credit limit increases, your credit score will improve. This is due to what is called the use of credit.

Simply put, this is the percentage of your overall credit that you are using. If you only have one credit card billed up to the limit, you have a high credit usage rate, which can hurt your credit score.

But if you keep your usage low, your credit will be in good standing. This is where an increase in the credit limit comes in.

If you increase your overall limit while maintaining the same spending habits, your usage rate will decrease – and help increase your score.

To check your current score and keep an eye on it, you can subscribe to free credit monitoring with a bunch of online services. Borrowell is popular in Canada; you’ll receive monthly updates, tips on how to improve yourself, and suggestions for credit cards and other products that are great for your current score.

Want a higher limit? Start by asking

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Think you want to increase your credit limit? There are several ways to go about it.

You can apply for higher limits online from your credit card issuers. Or, if you prefer to speak with a real person, you can call the card companies. Customer service reps will likely ask you why you are looking for a raise and if your income has increased recently.

You will want to have these answers ready. Desiring a higher credit score is a good explanation for your request, but a bad explanation would be that your out of control spending habits tend to push you up against your current limit.

A potentially easier way to increase your overall credit limit is to apply for a new credit card. The new available line of credit will increase your overall limit, reduce your credit usage, and improve your credit score.

Are you sure you want more credit?

Portrait of a middle aged man doubting holding a credit card isolated on yellow background
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Understand that a higher credit limit comes with risk. The temptation is major: it’s easy to spend more if you have more credit, and you could soon find yourself with more debt than you can handle.

And be aware that a request to increase your credit card limit can lead to what is called a “serious investigation” of your credit. A thorough investigation of a lender can drop your credit score and stay on your credit report for years.

Note that you may want to not ask for a limit increase if your income has recently declined, as your card issuer will not be inclined to say yes. So, you might just want to wait until you have a stable and higher income.

Ultimately, increasing your overall credit could increase your credit score – if you know how to use credit responsibly. Make sure you understand if a higher limit is right for your situation.

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