How do you increase your credit limit?
If you have a credit card or overdraft but want to increase your credit limit, how can you go about it? This guide looks at what you can do to increase your limit and, more importantly, whether or not you should.
What is a credit limit?
When you apply for a credit card, you don’t know what the credit limit will be, although the lender may tell you the maximum for new customers.
That can be a real problem in some cases. For example, if you want to transfer an existing balance, to take advantage of a 0% deal, but your credit limit is too small to do so, you might be disappointed.
Increasing your credit limit
If you aren’t happy with your credit limit, you can request a higher limit from the credit card provider.
However, it is a good idea to wait for several months first so that the lender can see that you are a sensible customer.
Of course, if you exceed the limit on your card or miss any payments, the credit card company or bank won’t agree. Not only that, but you’ll damage your credit rating, which may stop you getting a better credit deal elsewhere.
How to improve your credit score
When you want your lender to increase the amount you can borrow, you need to be as creditworthy as possible. They won’t give you a higher limit if they think you’re likely to default or if they think you can’t afford to repay in full.
Lenders decide whether or not you’re a suitable customer by looking at your credit record and in many cases, carrying out a credit score as well as other checks.
But before you take any steps to increase the amount you can borrow, you need to be sure it’s right for you. Here’s what you need to think about.
Increasing your credit limit – Can you afford it?
Whenever you are considering increasing your debt, it’s essential you work out a repayment plan that you can afford first.
Don’t increase your debt without authorisation
If you want to increase your authorised overdraft limit then it can be tempting to simply keep spending. Unfortunately, some banks and building societies do allow you to spend beyond your overdraft limit (although others may refuse to pay and charge you an ‘unpaid item’ fee).
However, there are almost always high fees for this kind of unauthorised spending and you risk damaging your credit rating.
Should you increase your credit limit?
It’s worth thinking about why you want to increase the amount you can borrow. There could be some perfectly sensible reasons but it also might be a warning sign that you aren’t handling your debt well.
When to consider increasing your credit limit
For example, maybe you use your credit card to pay for work-related expenses before claiming them back. If your expenses suddenly grew then it would be a good idea to increase your credit limit to avoid a cash-flow problem.
When not to increase your credit limit
However, perhaps you want to increase your credit limit because you are struggling to meet all your expenses, including repayments. If that’s the case then increasing your credit limit isn’t the best idea as you’re really only adding to the problem.
If that’s the case, it’s important to act as soon as possible to stop yourself getting into levels of debt you can’t pay off. You can also ask to reduce your credit limit, if you’re worried that you’ll be tempted to over-spend.
Steer clear of high cost lending
If you can’t increase your credit limit then you may be tempted to turn to expensive, short-term lending.
In many cases borrowing at a high rate of interest just delays and worsens the problem and so should be avoided if possible.
Read the guides in our section Last resort borrowing.
Increasing your credit limit – Is it a bad idea?
Even if you’re not at risk of taking on too much debt, increasing your credit limit might not be the best thing to do.
It will increase the temptation to take on more debt than you otherwise would. It can also stop you qualifying for other, more important lending like a mortgage.
That’s because lenders often look at the amount of credit you have access to when they are deciding whether or not to lend to you. Even if your credit card isn’t up to its limits, simply having a high credit limit might put other lenders off.