Do you know the Benefits of Increasing Your Credit Limit? If you don’t then that means you are missing out. I am going to show you how to increase your credit benefits and also the benefits that follow or come with it.
Without wasting much time I am going to begin and then share the information with you.
Benefits of Increasing Your Credit Limit
There are many benefits attached when increasing your credit limit and if you want to know these benefits here are below:
Lowers Your Credit Utilization
The FICO credit-scoring model will help your credit score if the amount of credit you have used is close to the total amount of credit available to you. This is because lenders consider you to be at risk of taking on too much debt, also making it more difficult for you to make future payments. Even if these risks do not actually apply to you, that is how the scoring model works, and then your credit score can suffer as credit utilization ratios increase.
For instance, if you have an amount of $2,000 credit limit and then you regularly end up with a monthly balance of around $1,800, you are simply using 90% of your available credit. Raising your credit limit will then reduce the percentage of funds being used, lower the credit utilization ratio, and you should improve your credit score.
Cheaper and Easier to Get Loans and Additional Credit
If your credit score is very high, you will have a better chance in the future of getting approved for a credit card, car loan, or mortgage. You will even also have a better chance of getting a lower interest rate since your credit score determines whether you will be offered the best available rate or a higher, risk-adjusted rate.
Helps in an Emergency
Having a credit limit well in excess of your usual spending amount gives you a resource if you have an honest or genuine emergency that you cannot pay for with cash. Say you are traveling, and you need to change your plans and then return home immediately. It probably will not be cheap to change your plane ticket, and it is convenient to pay for a plane ticket with your credit card.
Helps You Earn More Rewards
If you then consistently pay off your credit card balance in full and on time, but you are not putting all of your expenses on your credit card, this might be time to start. For you to have a higher credit limit it can help you do that and also increase the rewards you earn, such as cashback, points, or travel miles. The conventional wisdom says that you should never charge everyday expenses like groceries and gas to your credit card, but that advice only applies if you are carrying a balance—it is designed to help you avoid making a bad problem worse.
On the other side, if you had never carry a credit card balance, paying for recurring expenses on your credit cards will not cost you anything and even can help you earn more rewards. Those rewards can actually reduce your spending in other areas by simply helping you pay for vacations, gifts, clothes, and also nights out.
Let’s You Make Large Purchases Efficiently
You already know that when using your credit card to pay for large purchases is convenient and can also help you rack up rewards. What you might not know is this: your credit card likely includes a number of consumer protections that will come to your rescue if there is a problem with your purchase. For instance, MasterCard’s protections include extended warranties, price protection, and also coverage for damaged or stolen items. American Express also offers similar benefits.
Helps You Avoid Credit Score Dings
One way to gain access to more credit is to simply get another credit card, but increasing your limit on an existing card might also be a better option. According to FICO, opening a new credit card can even ding your score. When you open a new account, it then shortens the length of your credit history, and long history often means an improved score. The age of your oldest account, also age of your newest account, and then the average age of all your accounts are factored into the length of your credit history. This metric affects around 15% of your score.
Guidelines on how to Increase Your Credit Limit
There are two unique ways to simply approach a credit increase: Through an online request or a phone call to your card issuer.
Request a Credit Increase Via Online
If you think that you have a strong case for a credit increase, then making a request online can be simple and effective. Most card issuers have a menu option to request a credit increase from once you have logged into your account. Often, this takes just a click or two to submit your information, and then you may even receive instant approval. Other times, you might need to provide additional information by secure message or phone.
Generally, this option is even the best if you think your odds of receiving a credit increase are high (i.e. the case is clear cut and also does not require additional explanation). Incidentally, not all issuers will even give you the chance or allow you to dispute the decision or re-apply immediately; there might be a requisite waiting period after denial.
Request a Credit Increase Via Phone
If you do not think your case is straightforward, then you may want to call your card issuer and then speak with a representative. Speaking by phone will enable you to provide additional information beyond what will be available through online forms.
Calling is also a good way for you to find out what type of credit check your issuer requires in order to process your request. Soft inquiries will not be evident to other lenders who evaluate your credit report, but hard inquiries are then visible for at least the period of 12 months. Hard inquiries can even temporarily lower your credit score by a few points. A hard pull vs. a soft pull on your credit matters a lot if you anticipate applying for a mortgage, auto loan or new credit card in the nearest future.
You might also want to make your request by phone if you have an urgent need for a credit increase, such as a large, imminent purchase. The associate you will speak with can even expedite the information collection process so that you do not have to wait for follow-ups. Of course, you still might not even get an instant decision.
Should You Increase Your Credit Limit?
If you know you are likely to spend up to your credit limit no matter how high it is, then carrying the higher debt burden will probably outweigh any benefits from increasing your credit limit. Otherwise, you should then consider requesting an increase. Before doing so, ensure that you have an established credit history in good standing.
Is It Advisable To Increase The Limit Of The Credit Card?
An increase in the credit limit can only be taken by the banks as proof that they can simply trust you when they lend you money. A higher limit on your credit card can also lead to a high credit score and also a good credit score will then allow people easily get loans at low-interest rates.
What Exactly Happens When I Increase The Limit Of My Credit Card?
An increase in the credit limit can even improve your credit score and also allow you to get access to a lot more funds when you are caught in an emergency. This can even get you more money than you can actually pay back, and this is without accruing any interest.
Are There Any Disadvantages In Increasing Credit Limit?
Although when increasing your credit card limit it can improve your credit score, you must not increase your monthly debt at the same time. If the credit limit then increases, and your spending is the same, then it will lead to a reduction in your credit utilization ratio.
What Are The Main Advantages Of Increasing The Credit Limit?
Some of the main advantages of increasing the credit limit are mentioned below:
- More rewards.
- Multiple cards may not be required.
- Your credit score may improve.
- The credit utilization ratio will be low.