Getting your first credit card can be exciting. This means that a financial institution is willing to take the risk to extend you a line of credit. However, once you get over the initial rush of having your own charge card, you might find you’re a little bummed about exactly how low your credit limit — a.k.a., exactly how much money you can borrow — is.

As a new credit card holder, you may start off with a smaller limit. Good news: your credit limit does not have to remain permanent. Understanding the factors that go into your credit limit can help you know when it’s time to ask for an increase. Because while you might be subsisting on microwaved noodles now, you may soon be dining on Wagyu beef — meaning, your tastes are leveling up, and so should your credit.

Here, we break down (almost) everything you ever wanted to know about credit limits.

What Is a Credit Limit?

A credit limit is the maximum amount you can charge on a credit card. This is usually one of the first pieces of information you’ll receive when you’re approved for a credit card. This will also be listed on your credit card statement.

How Is a Credit Limit Decided?

Lenders look at a variety of factors to assess your financial stability and determine the amount of risk involved with lending you money. These may include:

What If Your Credit Limit Seems Low?

Remember, a low credit limit is not the same as a low test score. A lack of credit history can lead to a lower limit. This is because the credit card issuer doesn’t have enough information to fully assess the risk of lending you money.

Opening a credit card is like starting a new relationship: You have to build trust. Your first limit is your issuer extending you a small amount of trust. If you establish a good payment history — i.e., build trust — they may be more comfortable increasing your credit limit in the future.

The infographic below form Discover Card may provide you with insight into credit line increases.

 

credit-line-increase-infographic

Why Should You Ask for a Credit Limit Increase?

A bigger credit line can be helpful when paying for unexpected emergencies, larger purchases over time, or smaller, day to day expenses.

Using less of your available credit can help you maintain a strong credit score, says Credit Karma. Having a higher limit automatically lowers your available debt to credit ratio. Keeping your credit usage low and available credit high can turn your good credit score into a great one.

When Should You Ask For a Higher Limit?

People have lots of reasons for requesting a credit limit increase. Perhaps you travel frequently and want to be able to put flight and hotel purchases on your card to accrue extra miles or rewards, or perhaps you have a lot of work expenses for which you’re reimbursed. Here are a few factors to consider first.

Building a good credit history is partially about showing the credit issuer you can repay your balance on time, every month. If your credit score has increased since first getting a credit card, you’re in a good position to request a credit line increase.

Credit card companies look for a long history of good repayment behavior. If you have been using your card responsibly and repaying it consistently, you’re likely in good position to ask for a higher credit limit, and may have better chances of getting your request approved, says NerdWallet.

Being a student can offer you some financial perks — and a student credit card is a great way to start building your credit history. Plus, if you’ve been using your card responsibly for at least a year, demonstrating on time payment history and are able to prove that you have extra income or assets, you can call and ask for a credit limit increase. That doesn’t mean it’s guaranteed, but it never hurts to ask.

Once you graduate, you can ask your credit card company to change your student status to graduated, which might also help you get an increase on your limit. This allows you to maintain your credit history and makes you eligible for potential limit increases.

If you’ve gotten a raise or a new, higher-paying job, it may be a good time to request a higher credit limit. Having more income signals to the credit card issuer that you will be able to maintain your good repayment behavior, even if your spending increases.

How Do You Ask for a Credit Increase?

Most credit issuers have customer service reps ready to help in requesting a credit line increase, over the phone and online, says NerdWallet.

It’s not the end of the world if you get turned down, but wait several months before asking again. Requesting a credit increase can involve a hard inquiry into your credit history, and multiple hard inquiries in a short period of time can hurt your credit score. The good news is, in those months, you can work on improving your repayment behaviors, and even increasing income, to better your chances of getting approved next time.

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