When is The Right Time to Request Limit Increase on Your Credit Card?

The credit limit on your credit card indicates the purchasing power that the bank extends to you based on your profile, repayment behaviour and credit patterns. Increasing your credit limit not only boosts your buying power but also helps you maintain lower credit utilization which in turn improves your credit score.

Usually, your credit card issuer approaches you if you are eligible for a limit increase. People are apprehensive about agreeing to a limit increase when it directly comes from the bank thinking it is a trap. But most of the time there’s no catch in such schemes. The bank extends such a proposal when it considers you to be creditworthy and that you are ready to handle a higher credit. However, if you are requesting an increase on your own, the approval or rejection is a matter of timing.

What is the perfect time to request a limit increase?

You should request a limit increase when you don’t need it. Yes, you read that right. A desperate borrower will struggle to negotiate a higher limit whereas one who does not urgently need the money has better chances at negotiation. Here are a few circumstances when requesting a limit upgrade can be a good idea.

When you have established good repayment record

When the banks consider you to be a disciplined borrower, they will be more than willing to approve your request for a credit limit increase. If you have maintained good repayment behaviour across all your borrowings over the last few months, now is the right time to go for a limit increase on your credit card.

When your credit score is good

Although credit score is not the only factor that banks will consider for upgrading your limit, a good score will definitely make things easier for you. A high credit score translates to better repayment behaviour which makes you less of a risk for the bank and so they can increase your limit. So if you are planning to make such a request, start working on your credit score a few months in advance. Make bill payments on time, do not max out your cards and show that you are responsible towards your borrowings.

When you get a salary raise

Higher income means that you are financially sounder to handle credit. If you request a limit upgradation but you are at the same income level, the card issuer might reject your request. But if you have recently got a raise, chances of approval are high.

When it does not make sense to request a limit raise on your credit card? Taking cue from the above, we suggest that you should not go for a limit increase on your credit card in the following situations:

When your credit score is not good- You may be making all your payments on time but it takes a few months for the credit score to improve. Also, the score does not only depend on regularity of payments. Other factors like credit utilization ratio, previous loan defaults, delay in payment, etc. also impact your score. So if your score is not good, you should work on it before making a limit increase request.

When you switch to a lower paying job

In search of a better opportunity or to satisfy your passion, you might switch to a lower paying job. But requesting a credit limit increase soon after it will lead to rejection. Since your spending power has reduced, banks have no reason to allow a higher credit to you.

When you have recently applied for other loans

Firstly, you should not apply for a number of loans within a short span of time as it paints a picture that you are a credit hungry person. An increased credit limit is again borrowing some extra money from the bank. It is not a good idea to make such requests when you have recently applied for loans elsewhere.

When you are going for a world trip

Travel frees your soul but your financial inhibitions remain the same. Before going for an overseas adventure or a trip around the world, you might think of increasing your credit limit. But this is not advisable as a higher purchasing power encourages you to spend more. So unless you are completely sure that you will be able to meet the extra expenses when you get back from the trip, it is best to wait until you are back.

So, these are the circumstances under which a limit increase makes the most and the least sense.

Now some people argue that request rejection is the worst that can happen, so why not give it a try?

A limit increase request may initiate a soft pull or a hard pull on your credit score; it varies with the lender. When a limit increase triggers a hard enquiry on your credit report and it is rejected, it will have a negative impact on your credit score. So, if you really want to upgrade the limit on your credit card, it is best to ask your credit card issuer whether a hard inquiry will be initiated. If not, it is worth giving a try.

Banks may also reject your limit increase request if your account is too new. Some credit cards do not support the feature of limit increase in which case you can apply for a new credit card with the same bank. Also ask whether the bank charges any fee for increasing the limit.

Before requesting a limit, work on improving your credit score. Pay the bills on time; maintain good credit on existing card. Remember, thirty percent of your credit score is made up of your credit utilization ratio.

Once the bank approves your request and allows you higher credit, do not use up all your increased credit limit outright. Increasing the limit gives you more available credit which, if maintained for a few months, will go a long way in improving your credit score.

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