Few credit card users ask credit card companies to raise their credit limit, but research shows that doing so can help improve their credit scores. This is because the higher limit improves their credit utilization rate, which is the percentage of credit the consumer is using out of the total credit amount available to him or her.
With a higher limit, that percentage decreases, making the borrower look more appealing to lenders. Those who have had difficulty qualifying for low interest rates on auto loans or mortgages may find adjusting their credit utilization rate can help them get the rates they want because it accounts for almost a third of their FICO credit score.
However, consumers who tend to always carry large balances on their credit cards, especially those who are almost always at their current credit limit, may need to think twice before having the limit raised. If they are not able to control their spending, they may quickly reach near 100 percent credit utilization again, leaving them in more debt but without any additional benefit.
While some credit card users are uncertain if they qualify for a limit increase, lenders are actually fairly open to raising credit limits. Almost 80 percent of all consumers who ask the card issuer to increase their limit are approved. However, that statistic applies only to those over the age of thirty. Only about half of the borrowers under age thirty are approved for a limit increase.
If you want more credit, check out MoneyTips’ list of credit card offers.