Automatic Credit Limit Increase: How To Improve Your Chances

Your credit limit represents how much your card provider allows you to purchase on credit. When you opened your credit card, your card provider assigned your credit limit based on your financial circumstances when you applied. Since financial circumstances change, credit card issuers periodically reevaluate the cardholder’s credit behavior to ensure they’re taking on the appropriate risk.

An automatic credit limit increase is usually initiated by the credit card provider without being requested by the cardholder. These increases are a bit different for each lender, but are typically based on responsible usage of your credit card. It is usually considered a benefit to cardholders, as it allows you to have access to more credit without needing to apply for a new credit card or request a limit increase manually.

Credit card issuers review customer accounts periodically and initiate credit limit increases for cardholders demonstrating responsible behavior. Each card provider has their own policies, and there’s no guarantee you’ll receive an automatic increase. But knowing what creditors look for can improve your chances of an increase. Here’s a few factors card providers typically use as benchmarks for raising your credit limit.

Make On-Time Payments and Reduce Your Balance

Making consistent on-time payments demonstrates your responsibility with credit. Paying more than your minimum payment or paying off your credit card balance in full also demonstrates your ability to spend within your means. Both practices build confidence in your ability to make payments and can lead to a credit limit increase.

Use Your Card Regularly

Creditors want to be your primary payment method because it generates more revenue for them. If you’re looking for a credit limit increase, use your card regularly over a period of several months. The longer you’ve held the card and demonstrated responsible use, higher your chances of receiving an automatic increase.

Report Increases in Income

Not surprisingly, if your income increases your card provider is likely to raise your limit. As your income improves, your spending needs and ability to pay are both expected to rise. Periodically,  creditors may ask you to update your income when you login to their website or app. Some providers also allow you to update your income directly within your account profile.

While you’re only being asked for “income” you can include other forms of regular credits including other eligible sources such as child support, investment income, retirement and disability benefits. By updating your income, you can clue your creditor into a possible increase.

Improve Your Credit Score

While all of the above show responsibility with the lender, maintaining a good credit score is still a crucial factor in determining your overall creditworthiness. Some card providers rely on your credit score to evaluate your credit limit. On-time payments, longer credit history and paying down other debts will all improve your credit.

Making timely mortgage payments, paying off other debt or reducing the principal on your car loan, your credit score is likely to improve. And higher credit scores may trigger a credit limit increase.

Take Control of Your Credit Limit

It’s important to note that while some credit card issuers provide automatic credit limit increases, not all of them do. Additionally, there is no guarantee that you will receive an automatic credit limit increase, even if you meet the criteria mentioned above.

If you’re interested in a credit limit increase and haven’t received one automatically, you can always contact your credit card issuer to ask for a credit limit increase. Keep in mind that some issuers might require a hard inquiry on your credit report or ask you questions about your employment status and income.

Be aware that card providers can choose to reduce your credit limit if your credit behavior is deemed too risky.

The timing of an automatic credit limit increase can vary depending on the credit card issuer and their specific policies. Generally, credit card issuers review cardholder accounts periodically to assess eligibility for a credit limit increase. The frequency of these reviews can vary widely, but typically range from 6 months to once a year. You may be eligible more frequently when you’ve held the card for a longer timeframe.

A high credit limit can have both positive and negative effects on your credit, depending on how you manage it.

Positive Impacts

Improved credit utilization: Credit utilization is the percentage of your available credit that you’re currently using. If you carry a $200 balance on a card with a $500 credit limit, your credit utilization is 40%, but if you carry a $200 balance on a card with a $1,000 limit your utilization is only 20%.

Having a higher credit limit can result in a lower credit utilization ratio if you maintain relatively low balances on your credit card or cards. Lenders tend to view borrowers who are using all of their available credit as a high-risk of defaulting on those payments. So lowering your credit  utilization ratio can have a positive impact on your credit score.

Avoid opening new credit cards: With an increased limit, you may not need to apply for additional cards.When you open a new credit line, your score typically takes a hit, but a higher credit limit provides you with more purchasing power. It can be beneficial for handling emergencies, making larger purchases or managing expenses during times of need without needing to add other lines of credit.

Negative Impacts

Potential for overspending: A high credit limit might tempt you to overspend, especially if you have a tendency to carry credit card balances. If your higher limit encourages you to carry a larger balance or take on more debt than you can handle, your credit score may pay the price.

Higher debt, missed or late payment will all negatively impact your credit. Know your limits. If you struggle to keep your balance low, you can decline the limit increase. However, if the increase was already reported to a credit bureau, rejecting it may also lower your credit score.

Possible hard inquiries: A credit limit increase, especially one you request, may require a hard inquiry on your credit report. However, this impact is minimal. While multiple hard inquiries in a short period can lower your credit score, the impact is very slight and will only affect you if you’re shopping for other loans.

Card providers may automatically increase your credit limit, if your behavior demonstrates responsible credit usage. An increased credit limit provides more purchasing power and can improve your credit utilization ratio. Report any new income, pay your statement on time, and pay down your balance to improve your chances of an automatic increase.