Increasing Your Credit Limit is an important component of any credit card because it dictates the amount of credit at your disposal. Thus said, there are some basic benefits that come with a higher credit limit. Even though credit limits differ greatly from person to person and to a large extent depends on your credit score. One you should know is that the better your credit score, the higher the limit you are likely to have access to borrow.
However, your credit limit is not solely determined by your credit score, even though most banks will award credit limit increases to customers who have a proven good payment history. Additionally, as your credit profile improves, you can apply for a credit card with a higher limit. But be aware that declined applications may damage your credit score and potentially lower your limit.
6 Benefits of Increasing Your Credit Limit
With a higher credit limit comes several benefits some of which are more obvious than others. Let’s see some of these benefits:
Money for Emergency
A high credit limit prepares you for life’s unexpected events. These events can include car repairs, damage to your house, medical bills and other things that can turn up in your life that you didn’t plan for. Thus having a card with a high credit limit can help you get out of a fix.
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Bigger Buying Power
With a higher credit limit, you have a bigger buying power as compared to a low credit limit. You can use your card in making large purchases. A higher credit limit enables you make a high budget purchase with your card without having to worry about getting new credit. It can also help you rack up rewards.
Peace of Mind
Knowing that you can purchase the things you need, when you need them at the price they are sold for eases your mind from temptation and makes you feel good. It also shows that you have followed through on your credit obligations and makes lenders look on you more favorably. With this, you will also get to know that you are on the right track financially.
Lowers Your Credit Utilization and Increases Your Credit Score
When the amount of credit you have used is close to the total amount of credit available to you, your credit score will be impacted. This is so because you are considered a risk of maxing out your cards and having trouble making future payments. Now, these risks may not actually apply to you, but that’s how the scoring model operates. Thus having a higher credit limit will reduce the percentage of your fund’s usage, and improve your credit score.
Makes it More Cheaper and Easier to Get Loans and Additional Credit
If you don’t use nearly all of your available credit. You are perceived as being financially responsible by the credit bureaus. And this may increase your credit score. Once you have a high credit score. You stand a better chance of getting approved for a credit card, car loan, or mortgage in the future. There’s also the possibility of getting a lower interest rate. Since your credit score determines whether you’ll be offered the best available rate or a higher, risk-adjusted rate.
Increases Your Rewards
If you form the habit of consistently paying off your balance in full and on time, it will help your credit score. Especially if you put all of your expenses on your credit card. Even though the conventional wisdom is of the opinion that you shouldn’t charge everyday expenses like groceries and gas to your credit card, that advice is only applicable if you are carrying a balance. It is aimed at helping you avoid making a bad problem worse.
If you are the type that does not carry a credit card balance, paying for recurring expenses on your credit cards won’t cost you a thing. Rather it can help you earn more rewards which can actually reduce your spending in other areas by helping you pay for vacation, gifts, clothes, and nights out.
No matter how high your credit limit is, if you spend up to your credit limit, that major drawback will outweigh the benefits of increasing your credit limit. If you want to request an increase in your credit limit, you can simply send an email to your lender requesting a raise once you have met the conditions.