Credit Card Limit Increase Considerations

When is a Good Time to Apply for a Credit Card Limit Increase?

Credit card limit increase

Eiko and her credit card (Photo credit: eikootje)

Getting a credit card limit increase is a much better way to gain access to new credit than applying for a new card.  With a credit card limit increase there is no penalty for a new inquiry.   The credit card company’s own inquiry on an existing account does not have a negative effect on your credit score.  There is no brand new account to reduce the average age of your accounts.  There is no new annual fee.  You don’t have the nuisance of one more account to keep track of. There are no downsides to a credit card limit increase unless you don’t trust yourself.  What do the companies consider before they grant this much to be desired benefit?

Modern lenders no longer fear that having a large amount of available credit is a negative because the borrower may be tempted to run up a lot of debt.  All the reliable statistics show that people with a lot of available credit are very good risks for lending.

Credit Card Limit Increase Policies will be Spelled Out at Website

Of course policies vary from bank to bank or lender to lender but you can be sure they all give a lot of weight to many of the same factors before they will grant a credit card limit increase.  Federal regulations require that for a credit card limit increase a lender must ask you whether you are employed, what your income is, how much you pay for your monthly mortgage or rent and whether or not you have a savings as well as a checking account.  Your income is a huge factor in deciding the credit limit.  You can apply on line or by phone. The other important factor will be your credit score.  The inquiry the credit card company makes to consider a credit card limit increase will not hurt your credit score.  That is because they make regular inquiries on you anyway that don’t count as hard inquiries.  TIP:  Make payments slightly above the minimum if you can.  Repeated minimum payments are not a good sign to any creditor.  Most credit card companies will consider the following factors before deciding whether or not to give you a credit card limit increase:

  • Have you had the card for at least 6 months?
  • Have you had a credit card limit increase or decrease in the last 6 months?
  • Have you had any recent late charges?
  • Is the card always or usually near the limit you now have?
  • Have you been over the limit several times in the last year?
  • Have you been regularly making minimum payments only?
  • Have you had a lot of other recent inquiries?
  • Is there a pending fraud investigation?
  • Do you usually repay a large proportion of your outstanding debt?
  • Are your other accounts at or near their limits?
  • How much do you make?

Carefully Time Your Request for a Credit Card Limit Increase

Does it come as a great surprise that lenders only are comfortable lending to people that don’t look like they need the money very much?  This is a sad but true fact of life.  Kind of like how it is always easier to find a job if you already have a good job.  Life can be unfair that way.  That means you should apply for a credit card limit increase after you have put some good months in the books.  Your portfolio must be in as good shape as possible.  The time to apply for a credit card limit increase is when you don’t need it.  If you are approved it will be for the highest increase that they see your situation warrants based on their evaluation.  There is no point in requesting a specific sum for the credit card limit increase.  Unfortunately some low limit cards for people with marginal credit ask for 25% of the amount of the increase in exchange for the credit card limit increase.  This is an unfortunate and very questionable practice of Premier Credit Cards and CreditOne that should be examined by the CFPB.

Credit Card Limit Increase Request Turned Down?

Studies show that only 28% of cardholders ever ask for a credit card limit increase.  Surprisingly a recent study shows that 8 out of 10 who do ask for a credit card limit increase are approved.  Age and income are shown to be important factors in the lender’s consideration.   It would be wise for the cardholder to ask if there will be a hard pull on their credit report.  I have found that they seem to get  by with a soft pull.  You might ask how high they will go without the hard pull.

When the lender gives you the bad news the reasons for the decision will be spelled out.  If the problems can be fixed, apply your efforts there in a focused way.  You will probably have to wait for 6 months before reapplying for that credit card limit increase.  All is not lost if you are refused the first time as long as you are able to address the lender’s concerns.  A credit card limit increase always beats getting more credit through another new card.

Credit Card Limit Decreased Without Notice?

Unfortunately the CARD ACT reforms left the lenders with the right to decrease the cardholders credit limit without any notice to the card holder at all.  The reason for this is that changes in the credit limit were not considered “significant changes.”  This can leave an unsuspecting card holder with a real problem when the waiter brings the check or he is stuck out of state without any back up card.  Unfair as this provision is it’s the law of the land.  “Significant changes” as defined by the CARD ACT such as interest, fees and grace period require 45 days notice.

 

 

 

The following two tabs change content below.
After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

Latest posts by Edward St. Onge (see all)