How – and why you should – increase your credit limit

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A good credit rating can open many financial doors, bringing you lower interest rates and a better chance of getting any loan you need approved.

One of the main components of your credit score is your credit limit: the maximum possible amount you can borrow with each of your credit cards and other credit accounts. It might be time to apply for higher limits on your credit cards to increase your overall credit limit — and your credit score will thank you.

Just make sure you have the right reasons for taking this course and understand the pros and cons.

Higher limit, higher score

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In most cases, if your credit limit increases, your credit score will improve. This is due to what is called credit utilization.

In simple terms, it is the percentage of your overall credit that you are using. If you only have one credit card charged up to the limit, you have a high credit utilization rate, which can hurt your credit score.

But if you keep your usage low, your credit will be in good standing. This is where a credit limit increase comes in.

If you increase your overall limit while maintaining the same spending habits, your usage rate will drop and help increase your score.

To check your current score and keep tabs on it, you can sign up for free credit monitoring with a bundle of online services. Borrowell is popular in Canada; you’ll receive monthly updates, tips on how to improve, and suggestions for credit cards and other products that are perfect for your current score.

Want a higher limit? Start by asking

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Thinking of increasing your credit limit? There are several ways to go about it.

You can apply online for higher limits with your credit card issuers. Or, if you prefer to talk to a real person, you can call the card companies. Customer service reps will likely ask you why you’re asking for a raise and whether your earnings have increased recently.

You will want to have these answers ready. Desiring a higher credit score is a good explanation for your request, but a bad one would be that your spending sprees tend to push you up against your current ceiling.

A potentially easier way to increase your overall credit limit is to apply for a new credit card. The new line of credit available will increase your overall limit, reduce your credit utilization and improve your credit score.

Are you sure you want more credit?

Portrait of a doubting middle aged man holding a credit card isolated over yellow background
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Understand that a higher credit limit carries risks. The temptation is great: it’s easy to spend more if you have more credit, and you could soon find yourself with more debt than you can handle.

And be aware that a request to increase a credit card limit could result in what’s called a “serious inquiry” into your credit. A serious inquiry from a lender can take points off your credit score and stay on your credit report for years.

Note that you may want to wait to request a limit increase if your earnings have recently dropped, as your card issuer won’t be inclined to say yes. So you might just want to wait until you have a stable and higher income.

Ultimately, increasing your overall credit could boost your credit score – if you know how to use credit responsibly. Make sure you understand if a higher limit is appropriate for your situation.

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