Increasing your credit limit can boost your buying power, and having access to additional credit may even improve your credit score. How you approach your lender for an increase depends on the type of credit you have. Consumers can try to increase the limits of their credit cards or their home equity lines, while businesses may want to adjust their business lines of credit.
Some credit card companies will automatically increase your credit limit if you meet certain criteria and have had their card for at least six months, but you can also proactively contact them and request an increase. Some companies have an online option, while other companies require you to call.
You can improve your chances of getting an increase on your credit limit by:
- Maintaining a good credit score and payment history: Lenders review your credit score, how much debt you have, and your repayment history. Capital One looks for credit card customers who pay on time and consistently pay over the minimum amount to determine if they are good candidates for an increased credit limit.
- Providing accurate financial information: Credit card companies look at your annual income, employment status, and in some cases your rent/mortgage costs. Inform your credit card companies as soon as possible if your income has increased or your employment status or living expenses change.
- Waiting before you request another increase: Simon Zhen of MyBankTracker.com recommends waiting six months or more after receiving a credit limit increase before requesting another on the same card.
Ask your credit card company if it will make a “hard pull” by checking your credit when you request an increase. A hard pull may cause your credit score to dip by a few points. Some lenders look at existing reports from the credit bureaus to avoid this.
In an effort to protect consumers, the U.S. government passed the Credit Card Accountability and Disclosure Act of 2009, which requires credit companies to take into account whether customers can make payments before increasing their credit limits. If your credit isn't good, creditors are prohibited from increasing your credit limit.
Home Equity Lines of Credit
Home Equity Lines allow consumers to use their homes as collateral, which may substantially lower the interest rates they pay compared to other forms of unsecured credit, such as credit cards
You may increase your equity line by:
- Applying for a new home equity line: Many home equity loans have a draw period when you are allowed to use the funds you borrow and a repayment period when you have to pay back the lender. When you reach the maturity of your loan, you may be able to apply for a new home equity loan depending on the value of your home.
- Proving you are a responsible borrower: Lenders will look at your debt and repayment history to determine if will offer a limit increase. How much credit you receive will also depend on the equity in your home and your income.
Business Lines of Credit
Business lines of credit may be unsecured or they may require collateral, such as real estate, inventory, savings accounts or certificates of deposit.
You can increase your chances of getting an increase by:
- Offering increased collateral: Revere Bank advises that for some new businesses, or those with a limited borrowing history, you may have to offer collateral worth 120 percent of the line of credit.
- Showing strong cash flow: Wells Fargo wants business customers to have $1.50 of cash flow for every $1 of expenses.
- Having a good credit history: Banks want to see both a personal and business history of paying debt on time.