There are a few ways to increase a line of credit, and varied opinions exist on whether this is beneficial or not for the consumer. Sometimes the issue of raising credit limit really doesn’t exist. When people have very high credit, and don’t use it often, banks or credit card companies may automatically offer a higher line of credit. If a lender doesn’t give this option, there are several methods for obtaining more credit.
Many credit card companies now have online forms that people can fill out to request a higher line of credit. When these are not available, lots of customers simply call their lender and ask for a credit increase. The lender is under no obligation to raise credit level, but many times they will upon request.
People who may not be able to exercise this option include this with poor credit scores, and those who do not possess an excellent payment history. Another consideration is the percentage of available credit the person is already using. If credit cards are maxed out or close to being full, lenders may feel concerned about offering additional credit. It’s fair to say this concern has heightened since the economic downturn of 2007/2008.
Therefore, if a person wants to raise credit limit and doesn’t have impeccable credit scores, they may need to do some work first. This includes paying down credit card balances on time, and establishing a history of always paying more than the minimum balance. Each payment should not just cover interest but should also cover some of the principal amount owed. Clearing up other “dings” in credit history may be helpful too. After about three to six months of reliable and larger payments, a lender may be willing to increase available credit.
Occasionally, lenders will offer new cards with balance transfer options at low interest rates. It may help to switch cards if available credit is low. Lenders may offer a higher line of credit than a current card does when a switch is made with a balance transfer. Consumers should verify that this results in more credit before making a switch.
People who want to raise their credit limit are generally interested in knowing if this will positively or negatively impact credit rating. This really depends on how the new limit is treated. High limits can be great if they are not used. People should aim for the smallest debt to credit limit ratio, and a higher limit can mean a lower percentage of available credit is used. In percentage, it’s recommended people use no more than 30% of available credit, and lower percentages are better.
As an example, a person with a $10,000 US Dollar (USD) line of credit should have no more than $3000 USD in debt on the credit card. This means that currently 30% of available credit is in use. If credit limit increases to $15,000 USD, then there is some advantage when debt remains the same. Suddenly $3000 USD owed means people are only using 20% of their available credit.
On the other hand, when debt increases with credit limit, this will negatively impact score. If the purpose of raising a line of credit is to increase debt, it will cause a lowering in score until the debt is paid off. Those wishing to raise their limit in the hopes of raising their credit score need to bear in mind that a higher limit is only beneficial when it doesn’t become extra debt.