Credit Score and Credit Limit
A credit card limit is that maximum amount that you will be allowed by the issuer to borrow. There are two options to have a higher limit on your credit card. The first is to have a good credit standing with your bank where you have repaid all your debts in full and on time so they automatically increase your limit even without asking. This normally happens to individuals who have a very high credit score. If you have undergone any form of debt settlement Toronto, there’s a high chance that your issuing bank will deny you a credit limit increase. The other option is to ask your bank to increase the credit limit for you.
What are the benefits of seeking more credit?
Having a higher credit card limit has its benefits. With a higher credit limit, you will be able to increase your credit utilization. This simply means that you can show you are able to use only a small amount of the money that is available to you. For instance, if you have a credit card limit of $5,000 and you only use $1,000 every month, it means that your credit utilization is just 20%. The best practice is to maintain your credit utilization at below 30%. Having a very high credit utilization means that you are using most of the money that is available to you and can hurt your credit score.
For this reason, having a higher credit limit can help you to maintain a lower credit utilization and consequently improve your credit score. If you notice that the balance on your card is causing the credit utilization to be too high, you can go ahead and apply for a credit limit increase.
How to request for a credit card limit increase
It’s Simple, You Can Get In Touch With Your Issuing Bank And Ask Them To Increase Your Limit. Some banks allow card holders to fill a simple application form online. When making this application, you can emphasize on how you’ve been making timely payments and have had a low debt utilization ratio. This can entice the issuer to increase your limit.
What if the issuing bank refuses to increase your limit?
There are instances where your request to have a higher credit limit is denied. In this case, it is very important to get in touch with your issuing bank and find out why. It could be that your credit score has recently gone down making it impossible for the bank to honor your request. If this is the case, request for a copy of your credit report and review it so that you can see where the issue is. If there are errors in your credit report, request them to be corrected immediately because you have to deal with serious financial ramifications. Issues like debt consolidation services Toronto can eventually hurt your credit score and deny you an increased credit limit.