A guide to increasing your credit limit

There can be pros and cons to increasing your credit limit – use our guide to understand what you need to consider beforehand and how to increase your credit limit.

There can be pros and cons to increasing your credit limit – use our guide to understand what you need to consider beforehand and how to increase your credit limit.

Anelda Knoesen
From the Money team
6
minute read
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Posted 18 JANUARY 2021

What is a credit limit?

A credit limit is the maximum outstanding balance that you can spend on your credit card. It’s decided by your credit card provider. In most cases, you’ll only find out what your credit card limit is when you receive your new card.

If you go over the credit limit you’ll probably be charged a fee, which will be recorded on your credit file, and you may have to pay a higher interest rate.

If you’re worried about the limit you’ll be given, you can ask the provider about it before you sign up for a new credit card. They should be able to give you an idea of how much your credit limit will be. But this could mean they’ll do a credit check to make sure you can afford the repayments.

Why does my credit limit matter?

Your credit limit is important because it’s marked on your credit report to show how much credit has already been given to you. Other lenders can use this information to consider what debt you already have and avoid putting you at risk by offering you unsuitable credit.

Is there a benefit to raising my credit limit?

By increasing your limit, you can improve your utilisation ratio, which can improve your credit score. Your utilisation ratio is the percentage of credit you’ve spent against your overall available credit limit – you should aim to use only 25% of the credit available to you, where possible.

Using only a portion of the credit available shows a lender that you’re a responsible credit user. For example, if you have a credit card with a limit of £4,000 and you’ve only spent £1,000, you have a utilisation ratio of 25%.

Some credit agencies look at your overall credit limit in their scoring, not just what you’ve used.

Increasing your credit limit shouldn’t encourage you to spend beyond your means. If you increase your limit, then spend more on your card and use all the credit available to you, this will lower your utilisation ratio and negatively impact your credit score – even if you’re keeping up with your monthly repayments. If you don’t think you’ll be responsible with your new credit, it’s best not to increase your limit.

What do I need to consider before increasing my credit limit?

Before you apply for a credit card limit increase, there’s a few things to think about:

  • Why do you want a credit increase? Although it might just be that you want the assurance of available credit should you need it, it could also be a sign that you’re having problems with existing debt.
  • Can you afford it? You’ll need to be sure you can pay back what you owe and keep up with your minimum repayments.
  • The last time you increased your limit. Lenders may only allow a credit limit increase within a certain time frame – so you might not be able to increase it whenever you want.
  • Impact on your credit profile. If you request a credit increase, the new limit will be updated on your credit file.

What are my alternative options?

It’s important to consider all your options before increasing the limit on your credit card. You might want to consider a personal loan as an alternative.

If your main aim is to improve your credit utilisation ratio, you could do this by applying for another credit card that better suits your needs. Some credit cards have a sign-up bonus and you could benefit from cashback and rewards  cards. You could also transfer your existing credit balance to a credit card with potentially a higher credit limit and better interest rates.

How do I increase my credit limit on my existing card?

To increase the credit limit, you can either wait for an automatic increase or request one.

Automatic increase to your credit

Many credit card providers will increase your credit automatically if you’ve shown that you can manage your credit effectively - by keeping up with your monthly repayments, for example.

If you’ve shown that you’re a responsible credit card user, you could be offered a higher credit limit as frequently as every six months. An automatic credit limit doesn’t need your permission to be put in place, but you’ll have 30 days to reject the credit limit increase.

Request an increase

You can also contact your provider to ask for a credit limit increase. Some providers might carry out a credit search before they consider this, which other lenders can see and which could impact your credit score. Your provider will either agree to your credit limit request, reject it or present a counter offer with a smaller increase.

You can request an increase over the phone or via online banking. If you’re making a request online, you’ll need to sign into your credit card account or via your mobile banking app - although this will vary from provider to provider.

What information do I need to request a credit limit increase?

If you’re requesting an increase to your credit card limit, your lender will typically ask for your:

  • UK address history
  • National Insurance number
  • Employment status
  • Annual gross income
  • Requested credit limit

Should I increase my credit limit?

If you have a solid income, a good history of managing your finances and you regularly pay off your credit card in full each month, an increase in credit might work well for you. For example, if you’re planning a big expense but are confident you can comfortably pay off what you owe.

If you use your credit card for work-related expenses, an increase in credit might be a good idea, so you’re not left with a cash-flow problem before you have a chance to claim them back.

But if you’re struggling to make ends meet and pay off existing debts, a credit increase might only add to the problem. If you’re trying to get out of debt, the last thing you need is more debt on top of that.

If this is the case talk to your credit card provider. Under FCA rules, they must consider your situation and offer ways to help, like a reasonable repayment plan to help you clear your credit card debt more quickly.

At this point it might be better to ask about lowering, rather than raising your credit limit, to help you avoid overspending.

Find out more about tackling credit card debt.

Compare now

Instead of increasing your credit limit on your current credit card, you might find it better to increase your overall credit by applying for another card. Use our quick and easy comparison service to find a card that suits your needs.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

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