You should increase your credit limit as long as it won’t make you overspend. Getting a credit limit increase does more than just give you increased spending power. It also gives you the potential to lower your credit utilization, which can benefit your credit score. But just because receiving a credit limit increase is a good thing does not mean it’s always the right time to ask for one.
You shouldn’t ask for a higher credit limit unless your account has been open for at least 6 months and you’ve been paying the monthly bills on time. Otherwise, you’re likely to be rejected, as would also be the case if your credit score has gone down a lot since you got the card. Also, it’s best not to request an increase right before you apply for a credit card, auto loan, mortgage, etc. You’ll want your credit to be in top shape, and requesting a credit limit increase will usually result in a hard pull of your credit report, causing a temporary dip in your credit score.
Assuming the timing works out for your situation, you can look forward to a handful of notable benefits following a credit limit increase.
Why you should increase your credit limit:
- It gives you higher spending power.
- It can decrease your credit utilization ratio and help your score.
- It leaves you better prepared to face a financial emergency.
- It reduces the chance that you’ll max out your credit card.
If you curious about how a higher credit limit can lead to lower credit utilization and corresponding credit score gains, an example might be helpful. Let’s say you have a $500 credit limit. If you spend $200 in a month, you have 40% credit utilization. If your credit limit goes up to $800 and you still spend just $200, you’d have 20% credit utilization. Anything under 30% is good for your credit score.
So, getting an increase can help you reduce your utilization percentage without having to cut back on your expenses. Plus, if you already have low utilization, a credit limit increase could allow you to spend more without hurting your score.
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