How to increase your credit limit wisely without hurting your credit score

The maximum amount you can spend is called your credit limit. As tempting as it might be to ask for a higher limit, if you're not prepared, it could lead to overspending and problems with debt.

But having a higher credit limit can also provide you greater flexibility financially, improve your credit score, and gear you up for emergencies if you use it wisely. Here's a smart way to ask for a higher credit limit.

Understanding credit limit

Before asking for an increase, you need to know:

• Your current credit limit.
• Your average monthly spending.
• Your credit utilisation ratio of what you actually use of your credit.

You will usually find this on your card issuer's monthly statement, website, or mobile app.

Why consider a higher credit limit?

Having a higher credit limit comes with several advantages:

1. Lowers your credit utilisation rate, positively affecting your credit score.
2. Increases your buying power for large purchases, emergencies, and vacations.
3. Increases your ability to qualify for future loans with higher amounts.
4. Provides you with better features and rewards programs.

Smart ways to increase your credit limit

• Strong credit history: Lenders regard cardholders with a good payback history positively. You can demonstrate creditworthiness by paying on time, and in full, always.
• Use your card regularly: Using your credit card wisely, and frequently can show lenders that you are using and managing your credit. Don't draw on the entire card.
• Request an increase after 6-12 months: Once you've received your card, don't ask for a larger limit right away. Give it at least six to twelve months to build a strong payment history first.
• Report an increase in income: If you were promoted, switched jobs, or received other sources of income raising your earnings, advise your bank. This may improve the chances of them approving your request for a limit increase.
• Accept pre-approved limit hikes: Banks can sometimes offer limit increases for you on a pre-approved basis depending on your profile and usage. These are often easy to accept, but make sure it meets your actual needs before accepting.

Things to avoid

1. Don't ask for too many requests: It can be viewed unfavourably. And even then don't overdo it, still try to stay under 30% of the limit.
2. Overspending: When you increase your limit don't do so just to be able to overspend, it should be a premeditated act not an emotionally driven one.

How to request to increase your credit limit?

To request an increase to your limit you can:

• Accessing your mobile app or online banking.
• Phone your bank and request to speak to customer service.
• Go to your bank with proof of your latest income.
• Most banks assess your requests based on income profile, credit score, repayment history.

In conclusion, if managed prudently, a higher credit limit might enhance your credit situations and strengthen your financial situation. But it takes discipline, budgeting and common sense. Remembering requesting more credit limits is about managing credit, not about spending more.

Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.