As the holiday marketing machine cranks into gear, more of us will start contemplating the upcoming season’s spending — and our credit limits. Credit card issuers have relaxed their lending policies, says CardRatings.com founder Curtis Arnold, especially for people with good credit. But the experts say there’s a right way and a wrong way to go about seeking a credit limit increase.
1. Have a good reason. Before you seek an increase, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, you should evaluate why you want it. “They should ask themselves if they’re handling their current debt obligations responsibly — and by that I don’t mean making the minimum payments.” Only ask for an increase if you can pay your balance in full every month; don’t do it if you’re going to depend on that extra credit to make ends meet.
2. Figure out which card you want raised. Not all, but many issuers will respond to a request for an increase by checking your credit, otherwise known as a “hard pull.” “Such inquiries can lower your scores slightly, typically by five points or less, and can be expected to continue to impact your scores for one year,” says Barry Paperno, community director at Credit.com. The hit isn’t much, but it could cause trouble if your score is already very low or if you’re on the cusp of a major purchase like a house or a car. “Only apply for credit limit increases on cards with the best chances of success,” he says.
3. Make sure your credit is decent. If you have blemished credit, it might seem reasonable to try and get an increase to burnish your score a bit, but Cunningham says this is risky. “If you have a compromised credit report, the last thing you need is to be putting multiple inquires on your credit report,” she says. “If you’re already low, every point matters.”
4. Don’t ask too soon. “Most credit card companies will automatically review your credit after about six months or so of card membership,” says Ken Lin, CEO of CreditKarma.com. “However, if this doesn’t occur, you can call up your issuer to request an increase.” It’s not a good idea to ask for a limit increase within six months of getting a new card, though. That’s likely to be a red flag that could lead to a denial.
5. Don’t ask for too much.“Be a little bit conservative,” Arnold says. “Usually they’re going to base their decision on your credit as well as what kind of a line increase you ask for. You can’t expect typically to double your credit line.” Aiming for 10% to about 25% is a good rule of thumb, he says. If you ask for too much and get declined, you’ll probably have to wait at least two to three months before you can ask again, Arnold says. And don’t forget that each request comes with its own credit-deflating inquiry.
6. Build your case. “Remind them how long you’ve been a loyal customer and that you have a loyal payment history,” says Cunningham. If your household income has recently increased, it’s not a bad idea to mention that. It also doesn’t hurt to offer a sensible reason why you want more credit: You’ll be traveling more often, you want to start paying more bills with your card, or you want to earn rewards for things you buy anyway.
7. Be smart about your new borrowing power. Cunningham says a new NFCC survey of more than 2,000 people found that 22% can’t make ends meet without relying on credit cards, and 24% more say they would have to make “significant lifestyle changes” if their access to credit was eliminated — both dangerous financial positions to be in. “A higher credit limit shouldn’t mean more credit card debt,” Lin cautions. “Don’t change your spending habits just because you have the capability to do so.”