Improve Credit by Increasing Your Credit Card Limit

By increasing your credit limit to debt ratio, you can improve your credit. One way to do this is by increasing your credit card limit.

One way to improve your credit score is to increase the credit limit available on your credit cards. Here's why this might help your credit, and how to get your credit card limit increased.

(To learn why rebuilding credit without getting new credit is a good idea, and for other ways to do this, visit our Rebuilding & Improving Your Credit topic.)

Why Increasing Your Credit Limit Might Improve Your Score

Your credit score will improve if you use less of the credit that is available to you. In fact, some experts recommend you never charge more than a third to one half of the limit on your credit cards. (Learn about the factors that credit scoring companies use to determine your creditworthiness.)

One way to change your ratio of debt to available credit is to ask your creditors to increase your credit limits on existing cards (if you have any). This will immediately cause your outstanding credit card debt to become a smaller percentage of your credit limit. Of course, for this to work, your outstanding balance must remain the same -- which means you can’t use the credit limit increase as an excuse to charge more.

Is Increasing Your Limit Better Than Getting a New Card?

An advantage of requesting a credit limit increase over applying for new credit is that it might not show up as an inquiry in your credit report. (Lots of new inquiries can lower your score. To learn more, see our article on credit scoring.) Credit reporting agencies may treat information requests by one of your existing creditors as a creditor’s normal monitoring of its credit accounts, rather than as a credit inquiry.

How to Get Your Credit Limit Increased

To improve your chances of getting an increased credit limit, ask for the increase after you have brought any delinquencies current, made your monthly payments on time for several months or more, and already reduced the outstanding balance somewhat by paying more than the minimum payment each month. Creditors on accounts you have had for a long time are probably more likely to increase your credit limit than creditors on newer accounts.

(Learn more about credit reports, credit scores, and rebuilding credit.)

This is an excerpt from Credit Repair, by Margaret Reiter and Robin Leonard (Nolo).

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