How to Increase Your Credit Limit – and Why You Should

how to increase your credit limit

So you want to improve your credit score, but you aren’t sure how. Short of paying off all your debt overnight (not likely) or creating a lengthy and positive payment history in an instant, there aren’t many magic bullets.

Or are there?

Thanks to something called “credit utilization,” there is one way to quickly improve your credit score: increase your credit limit. Here’s how it works.

Credit limits are much less fixed than they seem

I used to think my credit limits were set in stone. It never occurred to me they could be changed fairly quickly. In fact, I discovered their fluidity a few years ago when suddenly many people were seeing their limits slashed without advance notice.

Why was this happening? It was the height of the recession and banks were getting serious about mitigating risk. That meant not just pulling back on lending, but on existing lines of credit as well, such as a credit card. For the consumer, that could have meant finding out the credit limit was decreased at the point of purchase. Or worse, when they got a notice saying they were suddenly over their limit.

Unfortunately, for some people, the sudden decrease brought their limit to the amount they owe (effectively maxing them out overnight). Luckily, this practice isn’t as rampant now as it was then. But it’s yet another reason to keep an eye on your monthly statements.

The way increasing your credit limit affects your credit score

As much as that situation seems like a nightmare, and it is, you can use the flexibility of credit limits to improve your credit score. And it’s all because of credit utilization.

Credit utilization is the amount of credit you’re using compared to the amount available to you. In other words, it’s whatever percentage your balance is of your total credit limit. For example, if you have a $10,000 credit limit and a $5,000 balance, then your credit utilization is at 50 percent.

It’s all about the credit utilization

Credit utilization makes up a large portion of your credit score because it gives lenders a picture of how stretched your finances are, or are not. In fact, credit utilization (also known as “amounts owed”) accounts for 30 percent of your score. Ideally, you want to keep this at or below 30 percent. (Meaning that balance from above would be too high to have a good credit utilization rate.)

In short, improving your credit utilization can improve your credit score. But, for most of us, it’s not so easy to quickly pay down a large portion of our credit card balance. However, if you’re able to get your credit limit increased, then you’ll get the same result: a lower credit utilization rate.

Increase your credit limit, decrease your credit utilization

Going back to our example above, increasing your credit limit to $15,000 would make your $5,000 balance 30% of the total. And thus, your credit utilization instantly improves as it hits that 30% suggested maximum.

That said, don’t stop working to decrease your debt as you work to improve your credit score. Interest makes debt a costly endeavor. Besides, the sooner you get out of debt, the sooner your credit score and financial outlook will improve.

How you can increase your credit limit

Increasing your credit limit isn’t difficult or time-consuming. All you have to do is call your credit card company and ask to speak to someone about increasing your limit.

From there, your issuer may do a credit check before they decide if you’re approved or not. Don’t let that discourage you.

Even if your credit score isn’t where you’d like it to be, you can improve your chances of an increase by highlighting the length of your history with the credit card issuer. And if you have any extra money to pay down your balance a bit, do that before asking for a credit limit increase. All of these small steps can help you get approved. Just remember to speak courteously and avoid giving sob stories. And, if you get a “no,” ask to speak to a supervisor – sometimes moving up the chain can turn a “no” into a “yes.”

In the end, your score can see an improvement even if they only increase your credit limit a small amount. Anything you can do to improve your credit utilization helps.

And, best of all, increasing your limit won’t cost you a thing – assuming you don’t actually use that shiny new credit limit, that is.

A word of caution before you go

There may be times when the desire to improve your credit score turns into a frenzy that overtakes sound financial practices. Remember that improving your credit score is important, but it’s not everything.

If any part of you has a fear that a higher credit limit will tempt you into debt, then don’t do it. Going into debt for a higher credit score doesn’t make any sense. Debt is expensive, it can be hard to pay off, and it can hurt your credit score. (Remember, the higher your utilization, the worse your score).

No matter what kind of financial advice you’re considering, tailor it to your circumstances and your comfort level. And remember that things that are good for your credit score (such as decreasing debt) are also good for your finances. So you don’t have to separate these two goals in your mind.

Want even more tips to boost your score in the new year? Check out our advice to help you improve your credit in 2017!

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Published in Credit, Credit Score, Financial Tips

  • Anthony Towey

    Hey I have Capital One and the credit increase is an automated process. They claim there is no manual process. Any advice?