Should You Increase Your Credit Card Limit?
If you’re thinking about whether or not you want to request an increase to your credit card limit, start by evaluating why you want to do so. While requesting an increase to your limit can give you access to additional credit, there are also times when a credit card limit increase would not necessarily be beneficial.
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Increasing Your Credit Card Limit to Reduce Your Credit Utilization Ratio
If the total amount of credit you’re using is approaching your total credit limit, your credit score could suffer. This is because your credit utilization ratio — your overall credit balance relative to your total credit limit, can be an important part of your credit score.
A higher credit utilization ratio may have a negative impact on your score, as it suggests to the issuer you may be close to maxing out your credit cards. For example, your income may have grown and, simultaneously, your monthly expenses have risen, therefore the current credit limits on your cards may accommodate this increased cost of living as well as before. In this case, increasing your card limit may prevent your credit utilization ratio from creeping up.
Additional reasons to increase your limit may include:
- Access to credit for emergency situations
- Opportunity to earn additional rewards on credit card purchases
- Simplify making larger purchases such as vacations, furniture or home renovation1
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Reasons to Not Increase a Credit Card Limit
A higher credit card limit could potentially lead you into taking on too much debt, which could impact your future requests for credit negatively. For instance, banks or issuers will decline applications for new loans if your income can’t support your existing debt plus the loan or mortgage payment you’re applying for.
A credit card company will have to check your credit with a “hard” credit inquiry when you ask to increase a credit card limit, and hard credit inquiries can impact your credit score. Weigh this carefully against the benefits of a higher limit.2