How much credit limit should i ask for

how much credit limit should i ask for

Many credit cardholders assume that getting a credit limit increase is akin to having a root canal — a difficult, drawn-out process, uncomfortable at best and, occasionally, excruciatingly painful. The truth is, it doesn’t have to be that way.

Let me preface the following discussion with this statement: if you don’t have a history of prompt payment, then don’t expect to easily get a higher limit. The issuer may turn you down outright, or you may have to trade something for the increase — such as rewards privileges, or a decent interest rate.

If you’ve ever defaulted on any credit card, have a lousy credit score, or you’ve already maxed out your card, then as they say in Jersey, fugeddaboudit. Credit card issuers are much more likely to increase your limit when you don’t actually need the money.

So why bother to increase your credit limit when times are good? Because you might need that higher limit somewhere down the road. Onto every parade some rain must fall, and a high credit limit can be a comfort when you find yourself in an emergency situation where a few thousand extra dollars makes a difference.

Arranging for a higher rate can also bump up your credit score. FICO scoring takes into account your utilization rate — i.e., the percentage of available credit vs. the amount you’re actually using. If you suddenly have more available credit while still owing the same amount, your credit score automatically goes up.

The easiest way to get a higher credit limit is simply to approach the card issuer and ask for it. If you’re a cardholder in good standing with more than six months of billing and payment history, and use your card regularly, they’ll look on you more favorably.

Some advisors suggest you apply for the credit limit increase online first, because you’re more likely to get it. Some issuers, like Citi and American Express, may even give you the increase automatically when you ask. Otherwise, you’ll need to call ’em on the phone and talk to customer service.

First of all, be patient. You’ve definitely got to be a model consumer during that first few months, always paying on time and never maxing out your card. Even if they say no when you ask for more credit, just wait a while and ask again. And if they offer you an increase that’s smaller than you expected, take it.

Then just wait a little more, be a good cardholder, and ask again. Keep it up, and you’ll eventually work your way up to the credit limit increase you were after in the first place.

how much credit limit should i ask for

Use this sample letter to increase credit card limit as a template for your formal notification.

To draft this type of letter, start with the basics. Give the credit card number you wish to increase the limit on. Ask for a specific amount of increase. If you have a $500 card, you may want to go up to $1,000. Asking to make a drastic jump like from $500 to $2,500 may be a bit unrealistic, but there’s no harm in trying. This is a formal letter and should be addressed as such.

Start with your name and address in the upper left hand corner. Next will be the date and lastly the credit card companies name and address. A subject line is acceptable in this type of letter. The first paragraph should state how long you have been a customer of that bank. The goal here is to establish precedence and show that you have been faithful to the company. If the account has always been in good standing, say so. If there have been some bad times, explain why, and be prepared to show documentation. State what the money is needed for and sign it. It doesn’t have to be long and drawn out, just get to the point. Give contact information where the company can contact you to discuss any questions they might have. While they may have your info on file, don’t assume it is always correct. They may need to contact you to approve the credit card limit increase. ​

Ask Stacy — How Can I Get a Higher Limit on My Credit Card?

This reader wants to increase his credit line to build his credit, but his bank isn't cooperating. The solution is simple .

How much credit limit should i ask for Photo by Yuri-Shevtsov /

Here’s a question from a reader about what to do when you’d like to raise your credit limit, but your bank won’t budge.

I had a dark spot on my credit record from years ago. Since then I have been using my credit wisely and trying to repair the damage, which seems to be working. I was requesting and receiving regular credit limit increases, however I’ve now been told by my bank there’s a freeze on increases: not my account specifically, but all this bank’s credit limit increases.

I’d like to move away from them, but I’ve had the card for a little while. What are my options?

Here’s your answer, Seth — I’ve expanded it to include general advice on improving your credit and shopping for credit.

If Seth wants more credit than his current bank is willing to provide, the answer is simple. He should keep that card and get another one. There’s no shortage out there: Go to our Credit Card page, and you’ll find dozens of cards competing for your business.

With his improved credit, Seth can probably get another credit card without much hassle. However, since a long credit history is better than a short one, he shouldn’t cancel his existing card. Assuming there’s no annual fee, he should just stop using it and move on.

While there are legitimate reasons to ask for higher limits, I hope Seth isn’t trying to raise his credit limit because he’s spending more than he’s making. He should be paying his balance in full monthly, not using his plastic to borrow. Carrying an unpaid balance on your credit card doesn’t help your credit score, and paying interest is never a good idea.

The best way to raise your credit score is the simplest: Pay your bills on time, every time, for long periods of time.

Seth might be trying to raise his credit limit to help his utilization ratio: the amount of credit used compared with the amount available. For example, if he has a $1,000 credit limit and uses $300 of it, he’s got a utilization ratio of 30 percent — the upper limit recommended by some experts to keep your credit score as high as possible.

There are two ways to lower a utilization ratio — pay down the balance, or raise the limit. Lowering a utilization ratio by raising a credit limit is a legitimate strategy, as long as you don’t use that increased limit to spend money you don’t have.

Here are the key ingredients of your credit score, according to Fair Isaac Corp., creator of the FICO score:

  • Payment history (35 percent): Your track record of paying back what you borrowed. Accounts in collection, late payments, and bankruptcy are bad; paying on time for a long period is good.
  • Amounts owed (30 percent): As explained above, this includes the amount of credit you use compared with the amount you have. Maxing out your credit hurts it; keeping a lot of unused credit available helps it.
  • Length of credit history (15 percent): The amount of time each credit account has been open. The longer your history, the better. This is why it’s typically best to keep older accounts.
  • New credit (10 percent): This includes recent inquiries and requests for credit. While applying for a new card or two won’t hurt, regularly applying for new credit cards or other loans can cost you.
  • Types of credit used (10 percent): There’s all kinds of credit out there, from revolving (credit cards) to installment (car and home loans.) Fair Isaac likes you to be well-rounded and sample them all. In short, diversity helps.

Credit cards are an example of revolving credit. If that’s the only type of credit reflected in your history, you might consider taking out an installment loan, like a car or home loan. That will positively influence your “Types of Credit Used.”

On the other hand, if you do that you’ll be paying interest, which will obviously cost money. If you need a car and have to borrow to buy one, or you want to buy a house and need a mortgage to pay for it, fine. But I wouldn’t recommend paying interest just to increase a credit score. Not worth it.

In recent years, financial writers — myself included — have published tons of credit score tweaks and hacks. That’s OK. Credit scores are important, especially when you’re about to borrow big for mortgages and such. But let’s not lose sight of the big picture: Great credit scores aren’t the result of hacks, they’re the result of a long history of on-time payments. I’ve never used any score tweaks or hacks, or even paid that much attention to my credit score, and it was recently a perfect 850.

If Seth’s current card company gives him the cold shoulder, he should move on. But higher credit limits are a double-edged sword. While they may send your score in the right direction, they can also cause you a world of hurt.

Tread carefully, Seth.

You can ask a question simply by hitting “reply9rdquo; to our email newsletter. If you’re not subscribed, fix that right now by clicking here.

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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