How to increase your credit card limit

Understanding credit card limits

Credit card limits are set depending on lots of factors, from your income to your credit score. The maximum you can borrow is your credit limit. There are ways to boost your chances of increasing this. But borrowing more money can have a negative impact on your credit score.

What is a credit limit?

Your credit limit is the total amount of money you have available to borrow on your credit card. If it’s £1,000, for example, this is your spending limit. You can spend up to this amount on your card.

If you exceed your credit limit, you’ll be charged a fee and this will be marked on your credit report. Other lenders will be able to see the mark and it will reduce your credit score. This matters because a lower credit score means you’re less likely to be approved for credit in the future.

If you spend all, or most, of your credit limit each month, you will also reduce your credit score, though less than if you break your limit.

The spending limit is decided by your credit card provider. It looks at your credit score, income and borrowing history. You will be told the limit when your credit card is approved.

Factors determining your limit

There are a number of factors a credit card provider considers when setting your credit limit. They include:

Your credit score: the higher your score, the higher your chance of being accepted.

Your income: and a list of your outgoings.

The type of card you’ve applied for: some cards, such as credit builder cards, will have lower limits.

Your debt-to-income ratio: any existing debts you have and how much you have left each month after these bills are paid.

Your credit utilisation: how much credit is currently available to you, and how much of it you’re using. Credit agencies suggest it is bestto use only 25% of your available credit.

• How you’ve handled debt in the past: if you have had any defaults, major debt problems (such as IVA, Debt Relief Order, Bankruptcy) or legal action against you (such as CCJs)

Customer loyalty: how long you’ve been a customer with the provider.

Credit applications: other applications you’ve made for credit, which will be shown on your credit score.

How to request a credit limit increase

You can request a credit card limit increase by contacting your provider. Your provider might also offer you a higher credit limit without you asking.

Request a credit increase: if you would like a higher spending limit, you can contact your provider to request this. You may be able to do this via a banking or credit card app, through online banking or on the phone. The provider may carry out a hard credit search (which other lenders will see) when deciding whether to approve your request or not. They can then reject it, accept it or they may approve a smaller amount.

Automatic increase: credit card providers are allowed to automatically increase credit limits, unless you opt out of this. They will do this to encourage you to spend more. You can reject an automatic increase, but you’ll have to respond to your provider within 30 days to do this.

When to request a higher limit

You can request a higher limit for many reasons, such as if you need to borrow more money to pay for a big purchase. If you’ve shown responsible credit use previously, you’ll have a higher chance of being accepted for a limit increase.

But if you can’t follow the credit card terms and conditions and pay back the money on time, you could damage your credit score. You will be charged a fee if you miss a payment. Interest rates on a credit card can also change if you miss a payment. You could end up paying a higher rate.

A credit card limit increase can also boost your credit utilisation ratio. This is your available credit and the amount you’re using. Experian says for a healthy credit score, you should aim to use only 25% of the credit available to you.

How to prepare your request

You can apply to extend your credit limit through your existing credit card account, either via your app or through online banking. But you may have to apply in writing too. If so, you’ll need to include the following information:

Your name and address

Your annual income

Your employment status, and in some cases the name of your employer

Your outgoings and any outstanding debts

The credit limit you would like

Understanding potential outcomes

Your credit card provider will either approve your new limit, offer you a lower amount or decline your request. Even if your limit is rejected, if a hard credit search is carried out this will be marked on your credit score for other lenders to see.

Benefits of increasing your credit card limit

There are many benefits from increasing your credit card limit, especially if you’re a responsible borrower. Having more available credit can boost your credit score. This increases your chances of being approved for credit in the future.

Improved credit utilisation ratio

Your credit utilisation ratio is the amount of credit available to you that you’re using. You should aim to be using only 25% of the credit available to you for a good credit score. This means if you have a limit of £1,000, you only use £250 of this per month.

Greater financial flexibility

A higher credit limit means you have more money available to borrow, if you need it. This could be a buffer for emergencies or it might be to pay for a big purchase, such as a holiday or a new car.

However, if you aren’t able to pay back the money, having a higher credit limit could push you into problem debt. This can result in marks on your credit score, fines from your provider and a higher interest rate charged on the money you owe.

Potential credit score impact

There are pros and cons to increasing your credit limit when it comes to your credit score.

Considerations before requesting a limit increase

Before you request a limit increase, you need to consider if it’s the right decision for you. While more available credit can be a lifeline and boost your financial flexibility, it can also be a dangerous way to overspend and harm your credit score.

Impact of hard credit check on your credit score

A hard credit check will remain on your credit report and other lenders will be able to see it. You’ll be told when a hard credit check is carried out, and this usually happens whenever you apply for a credit or a credit limit increase.

In comparison, a soft credit check does not stay on your credit file. Soft credit searches are usually carried out when you use an eligibility checker. These can show you the likelihood of being accepted for credit. The same happens when you use a comparison website.

Financial discipline and avoiding temptation

If you get a higher credit limit, stay financially disciplined and avoid the temptation of spending more just because you can. Managed responsibly, a higher credit card limit can boost your credit score. If you know you can repay any extra you’re borrowing, the increase can be a good way to access more money, if you need it.

However, it’s a double-edged sword. If you fail to manage your money responsibly, it can impact your credit score and damage your financial health. A little financial planning, such as setting up a direct debit to pay off the debt (or at least the minimum), is a good way to avoid ever missing a payment.

You’ll also want to regularly check the account to make sure you’re using less than 25% of the credit available.

Evaluating your financial situation

Before you apply for a credit limit increase, think carefully about the reasons for doing so. If you can afford to repay anything extra you’re borrowing, or you’re asking for an increase so you have a buffer available in emergencies, it can be a helpful financial move.

But if you’re struggling to pay off debts or other credit commitments, increasing the limit on one card isn’t the answer. Instead contact your provider as soon as possible and let them know your situation. Financial Institutions (banks, credit card companies, and building societies) have a responsibility, under guidance set out by the Financial Conduct Authority (FCA), to help you to repay the debt. You can also contact a free debt charity, such as StepChange, for independent advice.

Conclusion: Increasing your credit card limit

Increasing your credit card limit can be a blessing or a curse. It gives you more money to borrow, whether that’s for your personal use or for a business. It increases your financial flexibility, gives you a buffer of money to fall back on if you need to, and it can improve your credit utilisation ratio.

However, it can also tempt you to spend more and push you into persistent debt if you’re not able to repay the money and end up spending the extra you’re given.