What Is a Line of Credit?
First, let’s define what a line of credit (LOC) is. It’s an amount of money an individual can borrow. With a credit card, an individual can charge purchases up to a certain amount: the line of credit set by the company. Once that balance is paid down, you can continue to use the credit card to charge purchases.
Why Would You Want to Increase Your LOC?
The simple answer: to increase your purchase power. The higher your line of credit, the more you can purchase. If you have a lower credit limit, you might not be able to make large purchases. But there are more benefits.
Increasing your line of credit may help improve your credit score because your score is heavily influenced by your credit utilization ratio (how much credit you’ve used out of all the credit you have available). By having a higher limit with no increase in spending, you can lower your utilization ratio, which could increase your score. Using less of your total available credit signals to lenders you are financially responsible, which may help you qualify for another credit card, car loan or mortgage in the future.
How Do I Increase My Line of Credit?
As with most things in life, there’s more than one way to achieve your goals.
Wait for Automatic Increases
The easiest way to increase your line of credit is to wait until your card company automatically increases it. Typically, after a certain amount of time, credit card companies increase your limits, pending you’ve paid all your bills with them on time. Once you prove you’re responsible, they usually give you an increase on their own and will be more receptive to you requesting a higher limit in the future.
Request an Increase
If your credit card company hasn’t automatically increased your limit, you can always ask for one. In order to have the greatest chance of being successful, request a modest increase on your best card. Asking for too much at once may signal you’re planning to spend more than you can afford, so small increases over time are key.
Be prepared to plead your case; come with reasons why you want an increase and justification for why you deserve one. Maybe you’re more comfortable with paying off your balance, so you want to purchase more with your card and less with cash. Maybe you’re planning a trip or big purchase requiring you to have a higher balance. Whatever the reason, explain it to your credit card company so they understand you’ve thought this through.
If you’ve consistently paid your bills on time and paid most or all of your balances, you’ve proven you can be trustworthy. Reminding them of your trustworthiness and loyalty as a customer will give you a better chance of getting the increase you want.
Apply for a New Card
Applying for a new credit card can be a relatively fast way to increase your line of credit, particularly if you currently only have one or two cards open. You want to avoid applying for multiple cards at the same time. Credit card companies will pull your credit score, and having too many credit pulls at once can negatively impact your score.
Credit Limit Transfers
Many credit card companies allow cardholders to transfer part of their spending limit from one card to another from the same company. Let’s say you have two cards from the same company, each with a $1,000 limit. You could transfer $500 of the limit of the first card to the second card so that the second card has a limit of $1,500 and the first now has a $500 limit.
This doesn’t increase your overall limit, but it does give you more flexibility. Some creditors charge a fee for transfers, so ask your card company prior to requesting a limit transfer.
Increased Credit Equals Increased Responsibility
With an increase in your line of credit comes an increase in responsibility. It’s tempting to purchase more with additional credit, but don’t let that lead you to charge more than you can afford. Use your credit card only for emergencies and purchases you know you can repay during that month.
If you get denied for an increase in credit, call your credit card company and ask them what factors played into their decision. Check your credit report to make sure you understand what has impacted your score so you know what steps to take next.
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