Increasing your credit card limit is a great way to improve your financial situation. Many people have the misconception that they cannot increase their limit because they are already over-extended on their cards. The good news, however, is that you are legally allowed to request an increase on your current credit limits.
Before you actually do, though, know exactly how to increase your credit limit without immediately lowering your rating. Your limit does not affect your rating at all, but how you use it may. Many issuers make hard inquiries on account of your being over-extended. The purpose of a hard inquiry is to find out if you are a credit risk. These inquiries will take place even when you ask for a rate increase.
What does this mean? Banks and other lenders are permitted to compare your existing balances with your new highest credit limits. If your new limit is significantly higher than your current balance, they are allowed to do a hard inquiry on your account. They will look at your new balance and your past usage ratio. They will base this information on how you potentially use your new limit and compare it to how you were using your current limit.
If they find you to be a credit risk, the issuer will likely deny your request for a new credit line. Do not fret. You can still increase your credit limits by improving your ratio. Begin by paying off any high-interest debt you may have. As you pay off your high interest debt, you should also make sure you keep your minimum payment as low as possible. It is a good idea to pay more than the minimum each month in order to get the most possible credit utilization ratio improvement.
You may have heard this before but it is true: lowering your total utilization ratio can help boost your available credit score. Your score will improve because lenders will see that you are able to use your existing credit limits. In essence, you are only being offered a credit limit because you are a high risk borrower. The lower your ratio is, the lower your available credit score will be. This may take some time so it is recommended that you save money first and then attempt to raise your utilization ratio after saving it.
If you wish to increase your credit limits, you need to find ways to convince card issuers to approve you for a higher credit limit. Card issuers have access to databases containing information about your financial history. If they find out you have bad credit, they will consider you a high-risk client and will most likely deny your application for a new card or a new line of credit. In the rare event they do allow you to obtain a new line of credit, chances are you will pay higher interest rates than you would with a lower limit.
To increase your credit limits, you should take advantage of opportunities such as soft inquiries. Soft inquiry means you apply for a credit line increase without actively requesting it. You do this by filling out an online application form. Some applications ask for your hard inquiry and some do not. Either way, this type of application allows you to get approved for a higher credit line increase without requesting a hard inquiry.
Another way to increase the amount of available credit is to close accounts you no longer use. This is a very good strategy for people who have slow payments and low scores. By closing accounts you will make it more difficult for creditors to check your credit rating and, in turn, increase your limit. However, keep in mind that closing accounts is one of the best things you can do to raise your available credit. It does, however, have a negative impact on your credit score if you do not have enough credit available to keep the new credit card offers coming. The best time to close accounts is when you need the extra credit most.
