Want a Credit Limit Increase?

A credit card can take you nearly you anywhere; the only thing that may be holding you back is the credit limit. Maybe you are considering a large purchase that your credit limit won't cover. Maybe you want to be able to take only one credit card when you go on a vacation. Maybe you want to earn the most rewards possible, by using your credit card for everyday purchases. Consumers have a variety of reasons for wanting a credit limit increase. If you wish your credit card had a higher credit limit, proving your credit-worthiness to the card issuer will make a limit increase more likely.

Understanding the credit card issuer's point of view will help you succeed in getting a credit limit increase. To the card issuer, increasing a card user's credit limit will mean either increasing their profit or increasing their risk. They will profit more if the card holder uses the card, and pays back the debt, with interest. Higher risk, of course, comes with extending even more credit to someone who already may not have a good handle on their finances.

Keep your credit score in top shape. Check your credit report occasionally and clean up any negative marks. Check your report for fraudulent activity that can bring down your credit score. One negative mark due to an innocent oversight or a forgotten bill can bring your credit score down enough to prevent a limit increase. Keep your account balances well under 30% of the credit limits to keep a healthier credit score. A better credit score equals lower APRs and higher credit limits.

Abide by the card issuer's terms and conditions. Paying on time and staying within your credit limit is extremely important. Card issuers want to see that you take your contracts seriously, and that you make good on your promises. Missed or late payments, and charging more than the credit limit are warning signals that the card user is over-extended and already has more debt than they can handle.

Use your credit card regularly. Using your credit card only occasionally or just for emergencies makes it difficult for card issuers to read your spending and bill-payment habits. When you use your card every month, and then pay your bill every month, card issuers can more easily see a pattern of responsible credit card use. Using your card routinely demonstrates that you know how to balance your many obligations.

Keep your account balances low. Credit card issuers want to extend additional credit to someone who can put the higher limit to use, but doesn't need it. A person who calls the card issuer for an increase, when all their credit card balances are nearly at the limit, is telling the card issuer that they either can't control their spending, or that they need credit to maintain their lifestyle.

Your entire credit card balance should normally fit into your monthly budget. Card issuers like to see that the card holder can easily pay down their debts. Paying the full balance most months shows the card issuer that you can control your spending, you manage your finances responsibly, and that your good credit record is important to you. Someone who normally makes only the minimum payment is telling the card issuer that they can't afford to pay more than that, and is a poor candidate for a credit limit increase.

Let the card issuer profit from you, at least a little. Paying your entire balance every month can save huge interest charges, but it's not very profitable for the card issuer. If you always avoid interest fees by paying off your balance, it wouldn't benefit them to give you an even bigger free ride. Occasionally, pay only part of the balance, and let the card issuer earn a couple of bucks in interest fees. This shows them that you are a good investment, and that a credit limit increase can bring them more profit.

Make sure you have the income to support the credit increase. Credit card issuers want to know that you plan on paying them back and that you have the means to do so. Your employment stability and your income are considered by the card issuer. They may not ask much about your current income if they are only increasing your limit by a few hundred dollars, but they're likely to want income documentation if you are looking for an increase of many thousands.

Request a credit limit increase for accounts that you've had for at least six months. Credit card issuers want to see proof of your responsible credit use over a period of time. Most card issuers have their own minimum time-frame for limit increases, varying from six months to a year. Some card issuers may automatically increase your limit after you had your account for only a few months, but that's usually because they started you off pretty low to begin with. It won't hurt to try, but asking for a limit increase too soon will usually get you nowhere.

Be aware that some card issuers may charge a fee for a limit increase.This is much more common with sub-prime credit cards, but a few cards for people with good credit are doing it, too. This fee may be anywhere from $25 to 50% of the increase. This fee may make a card worth getting rid of, especially if you have better options. Credit card issuers generally make more money by increasing a credit limit, so this just seems like they're unfairly trying to get paid for the same thing twice.

A credit limit increase can open new doors, allowing you to purchase a big-ticket item, transfer credit card balances from several cards, or let you reduce the number of credit cards you carry. A credit card with a generous credit limit can offer you flexibility and convenience. For someone who's responsible with credit, a credit card with a big limit might even be like a trophy; you'll probably never use it for anything, but it's nice to know you've proved yourself to the card issuer and are highly respected.

However, if you want a credit limit increase because your current limits just aren't enough, you may want to re-think whether an increase is a good idea. Maxed out credit cards and minimum payments are a sure sign that someone is living beyond their means. A credit limit increase will only make it easy to overspend and dig deeper into debt. More credit is not the cure for too much debt. It may be time to bite the bullet and start living a lifestyle you can afford, without the over-use of credit.

Credit Card Providers Get Choosey About Who They Lend To

Although figures showing how much credit card providers have reined in their lending over the past few months are hard to come by, there is widespread acceptance that credit card providers are being more selective with the type of people they currently give credit too.

More Credit Card Applicants Get Turned Down

The UK Cards Association estimates that around two to three years ago, one third of credit card applicants were being turned down, but it now suggests this number has risen. In fact, it goes as far to say that since the second half of 2008, somewhere between 40 and 50 per cent of all credit card applications are being rejected.
Defaqto, a financial research service also agrees that credit card providers are becoming more "choosey" about who they lend to.

David Black, banking specialist at Defaqto explained: "It is generally acknowledged that credit card providers are becoming far more choosey about who they will lend to and how much they will lend.

"In the mortgage market, credit card providers are after quality rather than quantity. Credit card providers also monitor their existing customers to determine those in, or possibly likely to be in financial stress.

"As a result, it's not unusual to get a letter saying that your credit limit is being reduced or your account is being closed."

Providers Change Interest Terms and Close Credit Card Accounts

In fact, according to a recent Confused.com survey which questioned 2,000 people from across the UK during the month of October, 20.4 per cent of those polled have had their credit card account closed in the past 12 months.

Of these, 29.2 per cent had their card closed by the credit card company. According to the respondents, their credit card was closed by the issuer because of their failure to keep up with the repayments.

Interestingly, 26.3 per cent of respondents also revealed their credit card provider had made changes to the credit agreement they had in place within the past year, which includes instances of increasing the interest rate and changing the credit limit. (See: How The Government Credit and Store Card Proposals Will Affect you.')

Meanwhile, the survey also showed that 37.5 per cent of people are concerned about applying for a credit card for fear of being turned down and the subsequent black mark that could be left on their credit file as a result.

Don't Be Put off Shopping Around to Find the Best Deal

The government is aware that consumers may be being unfairly penalised by shopping around for the best credit card deals, so the Treasury Select Committee is now seeking to understand the affects multiple credit searches have on individual consumer credit ratings by launching an inquiry into the issue.

It may be harder to obtain credit in the current recessionary climate, but you needn't be put off applying for a credit card just because you think it will damage your credit profile. You can check how likely you are to be accepted for a specific credit card by employing the use of a credit profile tool.