When and How to Ask for a Credit Limit Increase?

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Your credit cards and other similar lines of credit will always have a credit limit on them. It is the maximum amount you can borrow from your lender before the lender stops providing you with further credit. But these limits vary according to your credit score and repayment history. Occasionally, lenders offer to increase your credit limit with no strings attached. You have a higher chance of getting such offers if you have an excellent credit history and have always been good on repayments.

Other than the pre-approved credit limit increase offers, you can also request the lender to increase your credit limit increase. But there are specific terms and conditions to be followed.  Also, it is not always necessary for the lender to raise your credit limit on your request. Let’s weigh the pros and cons of requesting a credit limit against pre-approved increases to help you understand.

What are pre-approved credit limit increases?

Pre-approved credit limits don’t require you to qualify for anything and hence come with no strings attached. Therefore, they don’t reflect poorly on your credit report, so you can accept them. First, however, confirm with your lender that it is pre-approved, and you can pay it back with no issue. These pre-approved increases in limits are usually offered to people who haven’t requested to increase their limit and have always repaid the entire amount on time.

These can also increase your credit scores because your credit scores are based on how much credit you are using out of your total credit amount. If you won’t be using the entire credit limit after the pre-approved increase and you can repay the full amount on time, it can even improve your credit score.

Things to keep in mind while requesting a credit limit increase

Always consider your credit history before requesting an increase in your credit limit. Before increasing your credit limit, lenders consider your financial situation, credit history, repayment capacity, credit score, etc. Lenders like to accept requests from people who have an excellent credit history and a record of timely repayments. However, they try to stay away from people with bad credit scores. 

Since the lenders always scrutinize the borrower’s history, it will be recorded and reflected in your credit history if you’ve defaulted previously. So, your lenders will know about it, and they can reject your loan request. For example, if your financial situation is unstable, they might charge a higher interest rate. So, if your credit history is not excellent or if you have defaulted previously, it’s better not to apply for too many loans.

How does a request affect your credit report?

Once you submit a request to increase your credit limit, the lender makes a hard inquiry about your credit report. This inquiry would reflect in your credit report and affect your score. In addition, if you plan to get a home or auto loan soon, the hard inquiry might negatively affect your loan request. 

How to request a credit limit increase?

If you need money and have no other choice, requesting a credit limit increase might help you out of the tough spot. Initially, your score might decrease, but your score will improve with timely repayments. 

While requesting an increase, the lender will ask why you need that money. Answer honestly since they might carry out a background check, or your request could get rejected. The best option is not to mention that you are struggling for cash, making you seem like a credit risk. You should also explain why you want it and probably won’t use the entire amount, anyway. Assure them you will repay on time. The more you can convince them you aren’t a credit risk, the better. If the lender approves your request for an increase in credit limit, using your line of credit wisely is imperative. Otherwise, your chances of late repayments or default will increase, thus affecting your credit history in the long term.

Conclusion

Pre-approved credit limit increases are only for those borrowers with excellent credit history. So requesting an increase is okay if you can repay on time and have a good credit score. As long as you explain your financial situation wisely, you should be able to get approval for the increase in credit limit with no issues.