Credit cards can be valuable credit building tools, and sometimes it makes sense to ask for a limit increase. If you're trying to add points to your credit score, increasing the ceiling on your card can be a wise move. However, consumers sometimes have bad reasons for requesting a credit limit increase.
Also, just because a cardholder asks for a bigger spending limit doesn't mean that the issuer will automatically comply. Whether or not a creditor will give you more credit depends largely on your utilization rate and payment history.
Determining Why You Want a Credit Limit Increase
If you're planning on financing a car or some other type of purchase in the near future, raising your credit rating a few points could be helpful. And one way to give your score a boost is by improving your credit utilization rate.
Your utilization rate refers to how much of your available credit you're using at one time. Ideally, your card balances should reflect 30% or less of your available credit. If you are using more than this, your credit score can drop.
If you have lost points for this reason, you can get them back by either paying down your balances or adding more available credit. For example, if your credit limit is $6,000 and you have a balance of $2,400, you're at a 40% utilization rate. But if you can get your ceiling bumped up to $8,000, you'll be right at the 30% target for utilization.
On the other hand, if you want a bigger spending limit in order to support a shopping habit, this is a bad reason. Instead of looking for a way to increase your debt, you should reevaluate your financial goals and budget. Or, if you think that you need more credit in order to pay off other credit debt, this is not the right solution. Unfortunately, paying off a credit card with another credit card will get you nowhere fast.
If you need a quick fix in this type of situation, debt consolidation is a better option. Here, you would open a balance transfer account and spread your balance over two cards. And this should help your utilization rate.
Determining Whether or Not You Can Get an Credit Limit Increase
If you're asking for a limit increase for the wrong reasons, your credit card company may prevent you from making this mistake. Again, just because you request more credit doesn't mean that more credit will be extended to you. And, recently, card issuers have been pretty conservative when it comes to credit limit extensions.
For example, you will probably be denied if you've done the following:
- Missed payments
- Only made the minimum payment for several months
- Consistently used more than 30% of your credit limit or maxed out your card
- Applied for several new credit cards
Basically, if it appears to the creditor that you're relying too much on credit, you may be seen as a risky borrower. At this point, it makes sense that your credit card provider would be hesitant about giving you more credit than it appears you can handle.
Can You Finance a Car with Bad Credit?
If your credit is damaged because of credit card mistakes or for any other reason, you can still get auto financing. Even if your credit is bad, Drivers Lane can match you with a local dealership that can work with unique credit situations. In fact, you may be able to buy your new or used vehicle with little or no money down.
Drivers Lane has been helping car buyers with credit issues for nearly two decades. Our service costs nothing and contacting us places you under no obligation to purchase anything. So, go ahead and fill out our simple and secure online auto loan request to get started today.