How To Earn A Credit Limit Increase
There are many benefits of having a high-limit credit card. After all, who doesn’t want a higher credit line to spend from? The credit limit refers to the maximum amount that is available to you to spend on your card. While this is dependent on a myriad of factors such as income, credit score, past payment record, etc., there are still ways in which you can get a high-limit credit card. Here’s what you need to know.
How is your credit limit determined?
The first thing to understand in the quest for a high-limit credit card is how your credit limit will be determined. The major factors that determine your credit limit are your credit history and income. This should give you a clue as to how you can get a card with a higher credit limit. It goes without saying that increasing your income and improving your credit score will get you a card with a higher limit without any hassles. However, there are other ways in which you can get a card with a higher limit. Here are some of them.
Ways to get a high-limit credit card
1. Research and apply for high-limit credit cards:
Rather than waiting to be approached with offers from credit card companies, why not be proactive and apply for credit cards that offer high limits in the first place? Today, almost all the information you need is available online so understanding the different cards, their limits, terms and conditions, etc., should not be a problem. Also check the rewards, bonus points, cashback, discounts, etc., that each card offers as that too is a value-added benefit for any credit card.
2. Regular repayments:
If you already have a credit card and you are looking to increase the limit on your card, you can set yourself up to be approved for it by making sure that you pay your dues on time. You could get an automatic increase in your credit limit after 6 to 12 months of repaying your dues on time.
3. Improving your credit score:
Whether you have a good credit score or not, you can work on improving it by not defaulting on your payments and making all payments on time consistently and regularly. This will increase the chances of getting either a new credit card with a higher limit or increasing the limit on your existing card.
Now that you know how to get a high-limit card or increase the limit on your existing card, let’s take a look at the benefits of it in detail.
Benefits of increasing your credit card limit
More money to spend: The most obvious benefit of increasing your credit card limit is that you will have more money to borrow from your credit line. This can come in handy for any emergencies so rather than spending it on impulsive purchases, it would be better to be prudent in spending and allocate a certain amount just for unforeseen circumstances.
Higher credit score: A higher credit score is useful when you want to apply for any kind of loan, whether it is a home loan, education loan, personal loan, vehicle loan, etc. You must be wondering how a higher credit limit translates into a higher credit score. This is because the ratio of your credit utilisation will naturally come down as your credit score goes up.
This ratio is estimated by dividing your monthly spend by your credit limit. The lower your credit utilisation ratio is, the better your score will be because it is an indication that you are spending responsibly within the limit. It is always wise to aim for a ratio that is below 30% in order to maintain an optimal credit score.
Higher and better rewards: The higher your credit limit is, the more rewards, cashbacks, discounts, etc., you will get. This, in turn, helps in saving money in the long run.
Higher credit: When you have a higher credit score, you are more likely to get approved for any kind of loan with a higher credit. So, if you are planning to apply for any loan, getting your credit score in place will be a good start.
Now that you know what a credit limit is, how to increase it, and the benefits of it, all that remains is to implement the tips given above and get your high-limit credit card. It would be wise to use your card prudently so that you don’t overspend beyond your credit utilisation ratio. Getting your high-limit credit card is just one part of the equation. Maintaining your credit score and using it to balance your finances is the most important part. If you can maintain that balance, you will find that your credit card will be your best friend.